On 14 December 2011, the Irish Funds Industry Association issued a Corporate Governance Code (the "Code") for Irish Investment Funds and their Management Companies. It simultaneously issued a Frequently Asked Questions document ("FAQ"), to complement the Code and support its introduction.
The introduction of the Code arises from an invitation from the Central Bank of Ireland (the "Central Bank") to the funds industry in 2010 to develop such a code, as part of a process of introducing corporate governance codes for the many sectors of the financial services industry in Ireland. A steering group within the industry was established to lead the project, which involved significant consultation with the Central Bank.
Application The Code will apply to Irish authorised investment funds and Irish authorised management companies. Although the Code is voluntary in nature, its adoption is strongly recommended by the industry and the Central Bank. The Code comes into effect on a "comply or explain" basis. This means that where a Board decides not to apply any provision of the Code, it should set out its reasons why in the Directors' Report accompanying the annual audited financial statements or alternatively publish its reasons through a publicly available medium (e.g. a website) detailed in the annual report.
Timing The Code will be effective from 1 January 2012, with a transitional period of 12 months until 1 January 2013. The FAQ states that for Funds or Management Companies with financial year-ends of 31 December, the first statement of compliance will be included in the financial statements of 31 December 2012. For financial year-ends of 30 June, the first statement of compliance will be included in the financial statements of 30 June 2013.
Main Implications of Adopting the Code We are satisfied that the vast majority of the requirements set out in the Code are already being complied with by the Irish authorised funds and management companies we advise.
However, over the coming months, Boards will need to review the Code and consider whether to adopt it. Obviously, the practical implications of adopting the Code will need to be understood by each director. Accordingly, the following is a summary of the principal practical implications of adopting the Code in full, in terms of processes to be implemented and documented, which may or may not be in place at the moment:
(i) the Board will need to specify on a periodic basis, as appropriate, the...