A New Era for Irish Corporate Governance: Effective 2025

From 1st January 2025, a bespoke Corporate Governance Code came into force for companies incorporated in Ireland and listed on Euronext Dublin. This is a significant change for Irish issuers, providing a localised framework designed to enhance transparency, accountability and stakeholder engagement in today’s dynamic business environment.

Historical Context and Rationale

Historically, many Irish companies listed on Euronext Dublin followed the UK Corporate Governance Code—often supplemented by an Irish Corporate Governance Annex—to meet governance standards. However, evolving market dynamics, particularly in the wake of Brexit and the broader Capital Markets Union, have prompted a reassessment of this approach.

Notably, Ireland was one of only two of the 49 OECD-surveyed jurisdictions without its own national corporate governance code.

The new Irish Code has been introduced to:

• Reflect Local Realities: Tailor governance practices to the specific needs of the Irish market.
• Enhance Flexibility: Enable companies to adapt governance standards in line with shifts in the corporate, legal, and economic environment.
• Increase Clarity: Provide issuers and investors with a clear, home-grown set of principles and provisions.

Key Provisions of the New Irish Corporate Governance Code

The Irish Code largely mirrors international best practice, drawing on the well-regarded UK Code, but also introduces several notable differences. Some of the core features include:

1. Comply or Explain Approach

Fundamental Principle: Companies must either comply with the Code’s principles or explain any deviations in their annual reports. This approach encourages transparency and ensures that stakeholders understand the rationale behind any non-compliance.

2. Six Key Governance Areas

The Code explicitly addresses the following areas, providing detailed guidance on best practices:

1. Board Leadership
2. Company Purpose
3. Division of Responsibilities
4. Succession and Evaluation
5. Audit, Risk, and Internal Control
6. Remuneration

3. Director Independence and Board Composition

As with the UK Code, the board is responsible for assessing director independence. However, the Irish Code lists specific circumstances likely to impair independence, with a key variation in the employment by the company criterion—a three-year lookback period replaces the five-year period used by the UK Code.

4. Share Award Vesting

Executive directors’ share awards must vest over a minimum of three years under the Irish Code, compared to a five-year requirement under the UK regime. This adjustment reflects a strategic shift aimed at aligning long-term executive incentives with company performance.

5. Shareholder Engagement

When more than 25% of shareholders dissent on a board recommendation (up from 20% under the UK Code), companies must detail their engagement with shareholders in the subsequent annual report. This provision ensures that significant shareholder concerns are formally addressed.

6. Workforce and Stakeholder Engagement

Beyond the traditional focus on shareholders, the Code emphasizes the importance of workforce engagement. Boards are encouraged to routinely review policies that enable employees to raise concerns confidentially or anonymously.

7. Company Secretary Role

Under the new Code, the company secretary—not only serves as an advisor on governance matters but also, under the chair’s direction, is tasked with ensuring effective communication within the board, its committees, and between management and non-executive members.

8. Diversity and Inclusion Policy

The Irish Code requires companies to maintain a diversity and inclusion policy. This policy must address gender, age, disabilities, and educational background, include measurable objectives, and be reviewed annually.

9. Audit Committee Responsibilities

At least one member of the audit committee must demonstrate competence in accounting or auditing. Additionally, the committee’s focus under the Irish Code shifts slightly from financial reporting to monitoring the broader “corporate reporting process.”

Comparative Insights: Irish vs. UK Codes

For companies with dual listings in Ireland and the UK, the choice between the two governance frameworks remains open. While the UK Code continues to be recognized for its alignment with international best practices, the Irish Code offers several advantages:

• Local Relevance: The new Code provides a governance structure that is more closely aligned with Irish company law and market conditions.
• Flexibility for Future Evolution: With the ability to adjust provisions in response to local economic and regulatory developments, the Irish Code may evolve further and diverge from its UK counterpart over time.
• Enhanced Clarity for Investors: By establishing clear benchmarks and thresholds—such as the 25% shareholder dissent trigger and mandatory diversity policies—the Code aims to improve investor confidence and market integrity.

Implications for Irish Companies

As the new Code came into force for financial years beginning on or after 1st January 2025, Irish incorporated companies listed on Euronext Dublin will have to comply:

• Conduct a Detailed Analysis: Evaluate existing governance practices against the new requirements.
• Decide on Dual Listing Strategy: For companies with secondary listings in the UK, determine whether to adopt the Irish Code or continue with the UK Corporate Governance Code.
• Plan for Transition: Implement necessary changes to ensure compliance, particularly in areas such as director independence, executive remuneration, and stakeholder engagement.

The introduction of this tailored governance framework is a proactive step toward reinforcing good corporate governance and ensuring that Irish companies remain competitive and accountable in a rapidly evolving market.

Conclusion

The rollout of the Irish Corporate Governance Code signals a transformative moment in the oversight of public companies in Ireland. By establishing a clear, flexible, and locally relevant framework, the Code not only brings greater clarity to issuers and investors but also sets a robust foundation for maintaining high standards of integrity, transparency, and accountability in the Irish market.

As companies prepare for compliance starting in 2025, the evolving governance landscape will undoubtedly play a key role in shaping the future of corporate conduct in Ireland.

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