Michelle McLoughlin Knowledge Consultant
Anne O'Neill Senior Knowledge Executive
2024 AT A GLANCE
- The Screening of Third Country Transactions Act 2023 is still awaiting commencement.
- The Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2024 commenced on 1 July 2024.
- The first Irish Corporate Governance Code has been published.
- The EU Listing Act package is published.
- Cases involving directors’ conduct and performance of their duties continue to appear before the courts.
LEGISLATIVE DEVELOPMENTS
Screening of Third Country Transactions Act
Following a year of waiting, the commencement of the Screening of Third Country Transactions Act 2023 (the Screening Act) is now expected in or around 6 January 2025. Draft guidance for stakeholders and investors, as well as a draft application form, were published during 2024 and final versions are expected shortly.
Much has already been written about the Screening Act. 2025 will be a busy year for parties to in-scope transactions and for the Department of Enterprise, Trade and Employment, as both sides seek to get familiar with how the regime operates in practice.
Legislation on collective redundancies and insolvency
The Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2024 (the 2024 Act) commenced on 1 July 2024. As well as introducing amendments to enhance transparency for employees of employers who become insolvent and expand the avenues of redress in a collective redundancy, the 2024 Act also amends the Companies Act 2014 (the 2014 Act). Key features of the 2024 Act include:
- Liability for reckless trading: This is now a conclusively objective test, and a director may be found liable where, among other things, they ought to have known that they were a party to reckless trading and that their actions “would be likely to cause loss”. The defence to liability has also been narrowed and relief will be granted only where a director took “such steps as were reasonably practicable” to minimise the loss to creditors. In practice, these changes may impose a greater level of responsibility on directors and afford the courts wider discretion in determining liability.
- Duty to inform employees: Directors must notify employees and, where applicable, the employees’ representatives, of a winding up petition being presented to court and/or the appointment of a provisional liquidator. In deciding whether to make an order to wind up a company, the court will have regard to whether the directors have complied with their obligations to employees.
- Related company contribution to company debts: The courts look at the extent to which a company’s insolvency is attributable to the acts or omissions of a related company and may now consider “such other matters as the court considers appropriate”.
- Extension of time limits on unfair preferences: Certain acts or payments by a company, done with a view to giving a creditor a preference over other creditors, will be deemed to be unfair preferences and rendered invalid if done within particular time periods (‘hardening periods’). The courts now have discretion to extend these hardening periods to “such longer period as the court considers just and equitable having regard to the circumstances of the act concerned".
DEVELOPMENTS FOR LISTED ENTITIES
UK listing rules
In the UK, the Financial Conduct Authority has overhauled the Listing Rules (the UKLR) to better align with international market standards and to improve the global competitiveness of the UK market. The new UKLR, which have applied since 29 July 2024, represent a relaxation of the previous regime and a move to a more disclosure-based regime.
The Irish listing rules have not been impacted by these changes, but Euronext Dublin is considering its own revisions and published a paper for consultation in late September, which closed on 1 November 2024. Euronext believes that this is the "opportune time ... to significantly simplify and align the applicable rule book to ensure that it is fit for purpose".
EU Listing Act
At an EU level, the Listing Act package was published in the Official Journal of the EU on 14 November 2024. The legislative package is intended to make EU capital markets more attractive and facilitate access to capital by small and medium companies (SMEs). It is made up of three legislative acts:
- Regulation (EU) 2024/2809 (the Listing Regulation) amends the Prospectus Regulation (EU) 2017/1129 (the PR), the Market Abuse Regulation (EU) 596/2014 (MAR) and the Markets in Financial Instruments Regulation (EU) 600/2014.
- Directive (EU) 2024/2811 amends the Markets in Financial Instruments Directive (EU) 2014/65 in relation to investment research. Member States have until 5 June 2026 to transpose this directive.
- Directive (EU) 2024/2810 (the MVS Directive) requires Member States to permit multiple-vote share structures in companies seeking admission to trading on EU multilateral trading facilities (MTFs) for the first time. The MVS Directive will also protect the rights of shareholders who hold shares with a lower number of votes per share by introducing certain safeguards. Member States have until 5 December 2026 to transpose this directive.
Listing Regulation
The Listing Regulation applies on a phased basis on 4 December 2024, 5 March 2026 and 5 June 2026.
- From 4 December 2024, a revised approach to listing of risk factors in prospectuses under the PR applies. In addition, prospectuses need only be provided electronically on request and should be free of charge.
- MAR amendments from 4 December 2024 relate to dealings with Persons Discharging Managerial Responsibilities (PDMR) and Persons Closely Associated (PCA). The threshold for notification of such dealings is rising from €5,000 to €20,000. The list of exemptions is expanding to include financial instruments and other shares, and the list of exceptional circumstances where a PMDR can deal during a closed period is also expanding.
- From 5 March 2026, a new EU Follow-on Prospectus will replace the EU Recovery prospectus regime, and a new EU Growth issuance prospectus will replace the EU Growth Prospectus regime.
- From 5 June 2026, the discretionary national exemption threshold for public offers of securities will be raised from €8m to €12m (the current Irish threshold is €8m) and changes to other exemptions are planned. Various amendments will be made to further standardise and streamline the format of the prospectus document and summary, most notably in relation to the order of disclosure of information. ESMA is tasked with drafting technical standards.
- Changes to the MAR market soundings framework and the delayed disclosure of inside information will apply from 5 June 2026, along with changes to the disclosure of inside information during protracted processes.
Irish Corporate Governance Code
From 1 January 2025, the new Irish Corporate Governance Code (the Irish Code) will apply to companies with equity listings on Euronext Dublin. Companies dual-listed in both Ireland and the UK will be permitted, by Irish listing rules, to follow either the Irish or the UK Corporate Governance Code 2024 (the UK Code). The Irish Code retains the ‘comply or explain’ model of the UK Code and will be familiar to existing issuers in many respects.
While the Irish Code does not deviate significantly from the UK Code, Irish-listed companies should familiarise themselves with it and take note of the differences, which include:
- a higher threshold of 25% for addressing shareholder dissent, as the Irish Code has moved from the UK Code’s 20% threshold
- removal of the requirement to publish a six-month shareholder update, although the company must detail the process undertaken to consult with shareholders
- additional wording around the role of the chair in ensuring directors receive “relevant, accurate, timely and clear information” before and between meetings so they can “make a knowledgeable and informed contribution to board discussions”
- a requirement for the board to explain what arrangements are in place to engage with its workforce and why it considers them to be effective
- a reduction in vesting and holding periods for share awards from five years to three years
COMPANY LAW REFORM
The Companies (Corporate Governance, Enforcement and Regulatory Provisions) Act 2024 (the Act) was signed into law on 12 November 2024 and certain provisions commenced on 3 December 2024.
Key changes commenced on 3 December 2024 include:
- Hybrid and virtual general meetings: The Act reproduces the popular measures introduced by the Companies (Miscellaneous Provisions) (Covid-19) Act 2020 (the 2020 Act) and places them on a permanent statutory footing.
- Counterpart execution: The flexibility for companies to execute documents under seal in different parts, first introduced by the 2020 Act, has been reinstated.
- Mergers: The 2014 Act now permits a domestic merger to take place with a private limited company or a designated activity company (DAC). It will also be possible to merge (by absorption) two or more private or public limited companies in one transaction.
- More grounds of involuntary strike off: There are three new grounds for striking a company off the Register.
- Receivership and liquidation: A number of changes have been made to the powers and duties of receivers and liquidators, including changes to notification and filing procedures.
- Corporate Enforcement Authority (CEA): The Act grants the CEA additional rights and powers around the receipt and sharing of information. A new offence of obstructing or interfering with an officer of the CEA in the performance of their functions under the 2014 Act has also been introduced.
Among the provisions awaiting commencement is a new protection of the small company audit exemption whereby the exemption will no longer be lost following a first failure by a company to file an annual return.
NOTABLE CASES IN 2024
Company could assign its right to litigate to shareholder
In McCool Controls and Engineering Limited v Honeywell Control Systems Limited [2024] IESC 5, the Supreme Court held:
- The assignee of a company’s interest in a legal action may, in principle, be substituted as plaintiff to pursue the action in lieu of the company.
- This does not breach the rule established in Battle v Irish Art Promotions Centre Limited, which states that a company must be represented in court by a legal practitioner and cannot represent itself through a non-lawyer natural person.
This is a very significant decision, but many questions remain as to how such an assignment would be workable in practice and the terms would need to be carefully considered.
Director and non-director held personally liable for company’s debts
In De Lacey v Hevey & Anor [2024] IEHC 80, a director and a consultant (non-director) were made personally liable for the debts of a company being used to defraud investors. The judgment is a useful illustration of the factors the courts will consider in finding a director and a non-director personally liable for the debts of a company and the matters that will be weighed in determining the extent of liability.
Directors must have knowledge to be liable
In Lifestyle Equities C.V. and another v Ahmed and another [2024] UKSC 17, the UK Supreme Court held that directors could not be liable as accessories to a company’s trademark infringement where they were not aware of the “essential facts” which made the actions wrongful.
This decision is a welcome one for directors and it is consistent with the Irish law position that it is unjust to hold a director personally liable for acts done in the ordinary course of performing the director’s role, which cause the company to commit a tort, if the director has not acted wilfully or knowingly.
LOOKING AHEAD
- The Screening of Third Country Transactions Act 2023 is expected to commence in January 2025 and its operation will be keenly watched. A new EU Regulation on investment screening is also expected in 2025.
- The General Scheme of the Registration of Limited Partnerships and Business Names Bill 2024 may be picked up by the new Government.
- The General Scheme of the Co-operative Societies Bill 2022 has been slow to progress, but work may resume in 2025.
- Enhanced information gathering and surveillance powers for the Corporate Enforcement Authority, proposed in March 2024, may be introduced.