Euronext Dublin is expected to publish the first Irish Corporate Governance Code (the Irish Code) in the next few weeks. It is expected that the Irish Code will apply to financial years commencing on or after 1 January 2025. Companies that have a primary listing on Euronext Dublin will be subject to the Irish Code. However, if a company is dual-listed in both Ireland and the UK, it will have the option to either follow the Irish Code or the UK Corporate Governance Code (the UK Code). The Irish Code will retain the ‘comply or explain’ model of the UK Code and will be familiar to existing issuers in many respects.
Background to the Irish Code
Companies listed on Euronext Dublin are currently required to comply with the UK Code together with the Irish Corporate Governance Annex (the Irish Annex) on a comply or explain basis. In a consultation paper published in April 2024, Euronext Dublin outlined its vision for a new Irish Code and explained that the rationale for alignment between the UK and Irish stock exchanges has “weakened in recent years”, largely due to Brexit. As a member of the EU’s Capital Markets Union, “different imperatives and issues can, and may be expected to continue to influence corporate governance in Ireland, relative to the UK”. An Irish Code, “developed within, and for the Irish market” will give the Irish market the flexibility to adapt and evolve, while remaining autonomous. Plans are also in motion to establish a Corporate Governance Panel, which will meet periodically and monitor compliance with the Irish Code on a biennial basis.
A working group established in early 2024 reviewed the corporate governance codes of ten jurisdictions before selecting the UK Code as the most appropriate base code from which to work. It was decided that maintaining strong alignment with the UK Code:
- allows Irish listed companies to retain the same high standards of governance
- reduces the compliance burden for companies with a dual listing
- makes it easier for Irish companies to transition to the new Irish Code
- allows the Irish Code to continue to leverage off the resources surrounding the UK Code – e.g. the FRC’s Code Guidance and annual reviews
Key differences between the Irish and UK codes
The Irish Code, currently in draft form, closely follows the UK Code in most respects, but there are some key differences, including the following:
- Shareholder dissent: The Irish Code proposes to raise the threshold for addressing shareholder dissent from 20% (UK Code) to 25% of votes cast against a board recommendation. According to Euronext Dublin, this will align the provision with the votes needed to defeat a special resolution under the Companies Act 2014 (the 2014 Act).
- Six-month shareholder update: The Irish Code proposes to remove the requirement for publication of a six-month update on shareholder discussions and proposed actions on the basis that the summary in the annual report and the explanatory notes to resolutions at shareholder meetings are sufficient.
- Speak-up policy: A new requirement for the board to review its policy on ‘Speaking-Up’ is proposed.
- Role of the chair in the provision of information: Additional wording is proposed to specify that the chair ensures that directors receive “relevant, accurate, timely and clear information” before and between meetings so directors can “make a knowledgeable and informed contribution to board discussions”.
- Independence: With regards to the criteria likely to impair a non-executive director’s independence, it is proposed that the reference to being an employee be changed from “within the last 5 years” to “within the last 3 years”. Euronext Dublin considers this timeframe more appropriate for the smaller Irish market. In assessing independence, the board must provide an explanation of the factors the board took into account in making its determination. This has been taken from the current Irish Annex.
- Board review: New proposed wording introduces some flexibility into the decision to conduct a board review such that the chair should “consider” rather than “commission” a regular external board review. A new paragraph is proposed specifying that the results of the review should be used by the nomination committee “to identify and prepare a description of the skills, knowledge and experience required on the board as part of the appointments and succession planning process”.
- Risk management and internal control: It is proposed to omit the new requirement introduced in the UK Code 2024 that the board “maintain” as well as establish an effective risk management and internal control framework. Euronext Dublin also proposes disregarding the new provision 29 in the UK Code 2024, which requires public disclosure of further details surrounding the board’s annual review of the company’s risk management and internal control systems.
- Audit committee: While the UK Code specifies that all members of the audit committee must be independent non-executive directors, it is proposed to change this to require the majority of the committee to be independent non-executive directors. This reflects the position in section 1551(4) of the 2014 Act. As a consequence of this, a new requirement that the chair be independent is proposed. The requirement for at least one member of the audit committee to have “recent and relevant financial experience” (UK Code) is also to be changed to “competence in accounting or auditing”, which is line with the wording in the 2014 Act.
- Remuneration: It is proposed to reduce the vesting and holding period for share awards from five years to three years. It is also proposed not to adopt the UK Code’s new provision 38, which is more prescriptive as to the nature of the description of clawback and malus in annual reports.
Next steps
Euronext Dublin is currently reviewing responses to its consultation, which closed on 14 June 2024. The final version of the Irish Code may differ somewhat from the initial proposal. We will continue to monitor developments and provide an update when the Irish Code is published.
