Euronext Dublin Introduces Irish Corporate Governance Code

Euronext Dublin has published the first Irish Corporate Governance Code. The Irish Code will apply to Irish-incorporated companies listed on the regulated market of Euronext Dublin for accounting years commencing on or after 1 January 2025. Companies with a primary listing in Ireland and a secondary listing in the UK fall under the 'equity shares (international commercial companies secondary listing)' category of the UK Listing Rules (UKLR). These companies can choose to follow either the Irish Corporate Governance Code or the UK Corporate Governance Code.

Rationale for the Irish Code

The Irish and UK stock exchanges have historically been very closely linked. This proximity meant that there was a strong rationale for much of the Irish regulatory regime for public companies to closely mirror or complement that in the UK. As a result, the UK Code was applied to Irish companies listed both in Ireland and the UK, supplemented by the Irish Corporate Governance Annex for certain categories of companies. In light of Brexit and the evolving Capital Markets Union, Euronext Dublin considers that this rationale has weakened in recent years. In addition, Ireland was only one of only two jurisdictions in the 49 surveyed by the OECD in 2022 that did not have its own national corporate governance code.

Comparison to the UK Code

Despite this shift in thinking, Euronext Dublin acknowledges that the UK Code remains synonymous with international best practice. This, along with several other compelling reasons, such as the similarity between company law in Ireland and the UK, led to the UK Code being chosen as the most suitable foundation.

“Comply or explain”

The concept of “comply or explain” is fundamental to the UK Code and has been adopted in the Irish Code. This means that in its annual report, the company must state how the principles of the Irish Code have been applied. They must also show how the company has complied with all relevant provisions. In situations where the company has not complied, this must be explained.

Director independence

The Irish Code adopts the same position as the UK Code in that the assessment of director independence is a matter for the board to determine. The Irish Code provides a list of circumstances which are likely to impair a director’s independence. One of these circumstances – referred to as ‘employment by the company’ – differs between the Irish Code and the UK Code. The Irish Code has a three year lookback period, whereas the UK Code applies a five year lookback period.

Share award vesting

The Irish Code requires share awards granted to executive directors to have a minimum vesting period of three years, compared to five years under the UK Code.

Shareholder engagement

Under the Irish Code, the threshold for addressing shareholder dissent against a board recommendation is 25%, compared to 20% under the UK Code. The purpose of this is to align with the threshold for defeating a special resolution under the Irish company law. 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. Points to be reflected in the annual report must include what impact the dissent has had on decisions of the board and any further action proposed.

Workforce engagement

The principle of broader stakeholder and workforce engagement is central to both the UK Code and the Irish Code. There is a subtle difference between the two codes. The Irish Code provides that a board should routinely review the company’s policy regarding the means for the workforce to raise concerns in confidence and, if they wish, anonymously.

Company secretary

Both the UK Code and the Irish Code provides that directors should have access to the advice of the company secretary. Both Codes state that the company secretary is responsible for advising the board on all governance matters. The Irish Code differs from the UK Code by assigning the company secretary, under the chair's direction, the responsibility for ensuring effective information flow within the board, its committees, and between management and non-executive board members.

Diversity and inclusion policy

The Irish Code specifically mandates the maintenance of a diversity and inclusion policy. The factors to be considered include gender, age, disabilities and educational background. The policy should include measurable objectives for implementation and should be renewed annually. The UK Code does not require a specific policy to be maintained, though it does variously provide that diversity should be promoted.

Audit committee

Under the Irish Code, at least one member of the audit committee should have “competence in accounting or auditing” as opposed to “recent and relevant financial experience” as specified in the UK Code. Additionally, under the Irish Code the audit committee is required to monitor the “corporate reporting process”, The UK Code requires the audit committee to monitor the “financial reporting process”.

Comment

The introduction of the Irish Code is a significant and interesting step in the evolution of corporate oversight for listed companies in Ireland. For now, the differences between the Irish Code and the UK Code are subtle. However, a local code will allow for greater flexibility to evolve and diverge further in future. In-scope companies should undertake an analysis of the Irish Code and remain cognisant of this new regime.

For more information and expert legal advice on navigating the express provisions of the Irish Code, please contact a member of our Corporate or Equity Capital Markets teams.

The content of this article is provided for information purposes only and does not constitute legal or other advice.