A Guide To Corporate Governance In Ireland 2013
What are the main forms of corporate entity used in your jurisdiction?
The main form of corporate entity used in Ireland is the limited liability company. There are two types of limited liability company:
Private limited liability companies. These can be limited by shares or by guarantee. In private companies limited by shares, the liability of shareholders is limited to the amount, if any, of unpaid share capital. This is the most common form of corporate entity in Ireland. Private limited liability companies cannot offer their shares to the public and the right to transfer shares must be restricted by the company's articles of association (articles). The number of members of a private limited liability company must be limited to 99 or fewer persons. Public limited liability companies. These are companies that can offer their shares to the public. Public limited liability companies must have at least seven shareholders and an issued share capital of at least EUR38,095, of which 25% of the nominal value of each share and the entire share premium must be paid up. Public limited liability companies can have their shares admitted to trading on stock markets (in Ireland or elsewhere), but this is not a requirement. LEGAL FRAMEWORK
What is the regulatory framework for corporate governance and directors' duties?
The following are the principal sources of regulation for Irish companies (both public and private):
The Companies Acts 1963 to 2012 (Companies Acts). This is the core legislation applicable to companies in Ireland. This legislation will be consolidated and simplified under the forthcoming Companies Consolidation and Reform Act (Consolidation Act), which is expected to be enacted into Irish law by the end of 2013. Constitutional documents. Each company must have a memorandum of association (memorandum) and articles. The memorandum sets out a company's name, its objects and powers and its authorised share capital. The articles set out the company's internal regulations. Many Irish companies adopt the standard form model articles contained in the Companies Acts, known as "Table A" (Table A Model Articles). Generally applicable legal provisions. For example, tax, employment and criminal legislation (and so on), and the common law. The Office of the Director of Corporate Enforcement (ODCE) guidance notes. The ODCE plays an important role in enforcing and encouraging compliance with Irish company law. The ODCE has published a number of non-binding best practice guidelines that seek to promote transparency and accountability. Information leaflets and guidance notes. The Companies Registration Office (CRO) is the statutory authority for registering companies in Ireland. It also plays an important role in relation to the enforcement of Irish companies' filing obligations and has issued a number of useful information leaflets and guidance notes in that regard. The following additional regulations apply to public companies listed on the main market of the Irish Stock Exchange (ISE) (which is a regulated market):
The ISE Listing Rules (Listing Rules). The Listing Rules set out conditions for listing and the continuing obligations that apply to companies listed on the main market of the ISE. The UK Corporate Governance Code as supplemented by the Annex published by the ISE (Code). Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading (Prospectus Directive), the Prospectus Regulations 2005 (Prospectus Regulations) and the Prospectus Rules. The Prospectus Regulations and the Prospectus Rules govern the preparation and publication of prospectuses. Irish Takeover Panel Act 1997 (1997 Act) and Irish Takeover Rules (Takeover Rules). The Irish Takeover Panel monitors and supervises takeovers to ensure compliance with the 1997 Act and the Takeover Rules. Transparency Directive Regulations 2007 (Transparency Regulations) and the Transparency Rules. The Transparency Regulations and the Transparency Rules seek to enhance the transparency of information provided by issuers on a regulated market. Market Abuse Regulations 2005 (Market Abuse Regulations) and Market Abuse Rules. The Market Abuse Regulations and the Market Abuse Rules impose significant obligations on issuers and strengthen the rules in relation to insider trading and market manipulation. The following regulations apply to companies listed on the Enterprise Securities Market (ESM) (which is an unregulated market):
ESM rules, which are published by the ISE (ESM Rules). Directive 2004/39/EC on markets in financial instruments (MiFID). The Prospectus Regulations and the Prospectus Rules. ESM-listed companies are encouraged to comply with the Code or with certain key aspects of the Code. There are a number of Irish public listed companies listed on markets outside of Ireland such as the NASDAQ, NYSE and the London Stock Exchange (main and AIM markets) and these companies are subject to additional rules applicable to those markets.
Has your jurisdiction adopted a corporate governance code?
Public companies listed on the main market of the ISE (but not the ESM) must comply, on a comply-or-explain basis, with the corporate governance standards set out in the Code.
The Code sets out principles of good corporate governance under the following headings:
Leadership Effectiveness. Accountability, including internal control, audit committees and external auditors. Remuneration. Relations with shareholders. In the event of non-compliance with the Code, the company must provide a clear rationale for its deviation in its annual report.
There are no prescribed governance requirements for ESM companies, however, many companies adopt at least some elements of the Code. Some ESM companies also look to the corporate governance guidelines for smaller quoted companies (QCA Code). The QCA Code applies key elements of the Code and other relevant guidelines where, because of the cost or complexity, full compliance with the Code may not be appropriate. The QCA Code is voluntary rather than mandatory.
BOARD COMPOSITION AND REMUNERATION OF DIRECTORS
What is the management/board structure of a company?
Irish companies are managed by a single tier board of directors (board).
Day-to-day management of the company is typically delegated to the board in the articles with certain fundamental decisions relating to the company being reserved for the shareholders (for example, changes to the company's memorandum and articles).
The directors of a company together constitute the board.
Irish company law restricts certain persons from being appointed as directors, such as bodies corporate, undischarged bankrupts and persons subject to a disqualification order.
There is no general provision for employee representation on the boards of Irish companies (other than certain state bodies). However, a company's articles or an agreement with a third party (such as a trade union) can provide for employee participation.
Number of directors or members
All companies must have at least two directors. This will be reduced to one director in the case of private limited companies under the forthcoming Consolidation Act.
There is no upper limit on the number of directors that can be appointed, unless provided for in a company's articles.
Are there any general restrictions or requirements on the identity of directors?
There are currently no specific age restrictions for directors of Irish companies under Irish company law. However, given that the legal age of capacity is 18 and a director's appointment is not effective without consent, there is a strong argument that directors must be over 18. This will be clarified under the forthcoming Consolidation Act, the current draft of which (Consolidation Bill) specifies that no person can be appointed as a director (or secretary) unless he has attained the age of 18 years. There is no maximum age limit for directors.
Every Irish company must have at least one director who is resident in the European Economic Area (EEA), unless either:
The company has filed a non-resident bond to the value of EUR25,395 with the CRO. The company holds a certificate from the CRO confirming that the company has a real and continuous link with one or more economic activities in Ireland. The articles of a company may specify additional nationality requirements to satisfy tax residency requirements.
At present, Irish company law does not provide for gender quotas on boards or any related disclosure requirements.
For listed companies, the Code recommends that appointments to the board should be made with due regard for the benefits of diversity, including gender.
Are non-executive, supervisory or independent directors recognised or required?
Irish law recognises non-executive directors. However, they are subject to the same duties and obligations under Irish company law as executive directors.
Private companies can, but are not obliged, to appoint non-executive directors.
For listed companies, the Code recommends that the board should include an appropriate combination of executive and independent non-executive directors.
The Code recommends that, except for smaller companies, at least half the board of listed companies should comprise independent non-executive directors. For smaller listed public companies, the Code recommends having at least two independent non-executive directors.
The Code indicates that the following factors...
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