Irish Corporate Governance Code to be introduced

Euronext Dublin has published the first Irish Corporate Governance Code (the “Irish Code”) which sets out best practice governance standards for Irish incorporated companies with an equity listing on Euronext Dublin together with provisions aimed at underpinning the application of governance standards. The Irish Code will apply to listed companies with financial years commencing on 1 January 2025 and after. You can view the full Irish Code here.

Historically companies that are listed on Euronext Dublin have based their annual reporting and governance standards on the UK Corporate Governance Code (the “UK Code”). Although Euronext Dublin recognises the UK Code as being the standard bearer for international best practice in governance, there was consensus that Ireland should have its own governance code. Whilst the Irish Code is broadly based on the UK Code, it diverges from the UK Code in a number of areas. Companies that have a dual-listing in Ireland and UK will have the option to follow the Irish Code or the UK Code.

 

Comply or explain

The concept of “comply or explain” is at the core of the UK Code and has been adopted by the Irish Code. This principle essentially requires that compliance and adherence with the provisions of the code is detailed in the annual report and where there are any areas where compliance has not been adhered to or where requirements of the Irish Code have been disapplied, these must be explained in detail.

 

Shareholder Engagement

The threshold for addressing shareholder dissent against a board recommendation is 25% under the Irish Code (as opposed to 20% under the UK Code). The purpose of this is to align with the threshold for defeating a special resolution under the Companies Act 2014 (the “2014 Act”). Therefore, when there has been more than 25% shareholder dissent following a board recommendation, the company must detail the engagement process taken with its shareholders in its next annual report including what impact the dissent has had on decisions of the board and any further action proposed in this regard.

 

Director Independence

Independence of directors has been a key concern for many years and the Irish Code adopts the same position as the UK Code in that assessing the independence of a director is a matter for the board, taking into account a number of circumstances including time served on the board. The Irish Code differs slightly from the UK Code in considering whether independence is impaired when a director was previously an employee of the company and has a 3 year look-back period on this (rather than the 5 year look-back period in the UK Code).

 

Company Secretary

Like the UK Code, the Irish Code provides that the Secretary is responsible for advising the board on all matters of governance best practice. The Irish Code goes into more detail on this, providing that the Secretary has a number of responsibilities under the direction of the Chairperson including ensuring effective information flow between the Board and its Committees and management as well as ensuring that discussions, decisions and dissent are accurately captured within meeting minutes amongst other things.

 

Knowledge, Skill and Experience

A key concept of the Irish Code is that the Board has an appropriate mix of knowledge, skills and experience and these should be reviewed on an annual basis as part of the board’s performance review to identify any gaps on the board. A description of the knowledge, skills and experience required should also be prepared when appointing new board members and also used in succession planning. Where it has been found that the necessary expertise and skills are not available within the board, they should ensure that they have access to such expertise and skills, for example external consultants.

 

Audit Committee

The Irish Code provides that at least one member of the Audit Committee has “competence in accounting or auditing”, which differs from the requirement under the UK Code which provides for “recent and relevant experience”. The provision under the Irish Code aligns with Section 167(6) of the 2014 Act.

 

Diversity and Inclusion

The Irish Code requires that the company have a diversity and inclusion policy regarding gender and other aspects of diversity and review this on an annual basis.

 

Risk Management and Internal Control

The Irish Code diverges from the UK Code on this an aligns it with the wording contained in Section 167 of the 2014 Act referring to the effectiveness of the company’s systems of internal control and risk management.