Suzanne Kearney... In Company with Courtney 2025

Hello and you're very welcome to the December podcast of In Company with Courtney, the final episode of 2025. I'm Tom Courtney and in this episode I'm back in company with my former colleague from Arthur Cox, Suzanne Karney, with whom for a number of years I recorded the Back to Basic series. Suzanne is of council and heads up the knowledge team in the corporate department at Arthur Cox and Suzanne is responsible for legal regulatory and commercial awareness, a rise in scanning for clients and colleagues. Suzanne regularly authors and presents tailored updates on key legal developments for Arthur Cox's clients and fee earners. She's a recognized expert in company law and practice and is renowned both within and without coxs for her in-depth knowledge of the company's act, for her prior experience as a transaction lawyer in a former life, allows her to combine highly technical advice with a pragmatic approach. Welcome back Suzanne. Thanks Tom and it's really great to join you again like you. I'm always happy to discuss all things company law. So Suzanne, to mark the end of 2025, I taught our listeners might be interested in a review of the company law year that was in terms of the themes which are emerging from the courts in Ireland and the UK and also maybe a review of statutory developments in 25. Company law is such a dynamic topic that even when I was a practitioner whose sole focus was company law advisory work, I have to confess I struggled at times to keep on top of all developments. And when we've done that, we might then consider the big ticket company law developments which are coming down the pipeline in 2026. Yes Tom and I think there are some key emerging themes which we can distill from some recent case law both in Ireland and the UK and I think there are also some key practical takeaways that we can suggest. One emerging theme is the absence of a general single economic entity doctrine in Irish or UK law. We've discussed this recently amongst ourselves and I know you've been reconsidering the whole question of lifting the veil and the context of writing your fifth edition of the law of companies and have come to a similar conclusion. Yes I have and I think this sends out a really important message to Irish entrepreneurs and but especially those who are coming to do business in Ireland as you know Suzanne legal certainty and commerce is absolutely essential. Look it seems to me that absent special circumstances being fraud or evading existing legal obligations which is after all a type of fraud. The Irish courts are bound to respect the separate legal entities in a corporate group and not deemed the liabilities of some entities to be the liabilities of other entities. The reason I think so is that I think it's really significant that the legislature has expressly specified in what is now section 599 of the Companies Act which was first introduced in the Companies Act 1990. The circumstances in which one company in a group can be ordered to contribute to the debts and liabilities of another. That provision expressly states that matters which the court is to have regard to in deciding whether it's just inequitable to make such an order and to my mind this has to be the baseline for disregarding the separate legal personality of corporate subsidiaries. I think the significance of this provision and respecting the clear intention of the Eroctus may perhaps have been overlooked or at least underestimated. I think in Ireland the so-called single legal entity theory put forward in cases such as DHA, Foules, and the power supermarkets case is just not a sustainable proposition. I think it's significant that the power supermarkets decision was delivered in 1981 which was some 10 years before the Eroctus legislature for when contribution orders can be made in corporate groups. Yes, and there have been some very recent examples of where the emperor has no clues as stated in the very recent privy council decision in Jardine's strategic VOS's investment where the strength and importance of Salmon was rediscovered in abolishing the so-called shareholder rule. That is the notion that a company can't assert legal advice privilege against its shareholders, precisely because that rule cannot be reconciled with the Salmon principle of separate legal personality. In its 2024 decision in lifestyle equities and a med, UK Supreme Court reaffirmed that directors are not personally liable for companies acts by reason of ownership, control, or their office. However, separate legal personality does not shield directors from their own torsious conduct. Staying with directors until I'm dear comment regarding the Irish courts respecting the separate legal entities in a corporate group, the recent Irish high court decision in Dantle, O'Connell, Vio-Connor, Butler and Butler, merits mentioned from the perspective of separate legal personality and directors duties in a group context. In Dantle, in the context of an application to impose restriction orders, the high court reaffirmed that for duty duties are owed to the company as a separate legal entity in a group and not to the wider group. This decision complements the recent privy council and English authorities and highlights concrete consequences, in this case restriction, where directors subordinate a company's own interests to group convenience. In Dantle, the high court granted a restriction application under section 819 of the company's act, finding the two directors had failed to act responsibly in relation to the conduct of the fairies of the company, Dantle. Dantle, a non-trading company, held a commercial lease for a property occupied as a cafe by a related company, Aderson. The two individuals were directors of both companies and of over a hundred other group companies. There was no formal agreement or enforcement mechanism for Dantle to recover monies from the company occupying the property, Aderson, to meet lease liabilities. Payments ceased during the COVID-19 pandemic, and Aderson continued to occupy the premises rent free for two and a half years. Dantle ultimately became unable to pay its debts as they fell due and entered into creditors' voluntary liquidation. The high court's primary finding was that by putting in place a structure in which Aderson enjoyed the benefit of occupying the property while Dantle bore the burden and risk of the lease without any enforceable right to obtain funds to discharge its liabilities, the directors have failed to act responsibly with regard to the interest of Dantle as a separate legal entity within the group. The court noted that holding multiple directorships creates a heightened onus to ensure a separate assessment of each company's independent interests when key decisions are considered and to identify document and formalize such decisions. While directors may have regard to the interests of the group, this does not absolve them of their duty to assess the independent interests of the company as a separate legal entity. The Dantle decision is not new law, but the judgment reiterates that holding multiple directorships within a corporate group does not release directors of their obligations to each individual company. Yes, Dantle may not have created new law, but I do think that Mr. Justice Nessa Cahill's decision was a meticulously crafted exposition on the law relating to restriction and that would repay study by practitioners and business people alike. You mentioned the privy council decision in Jardine, Susanne. I think the strength of the opinions of the privy council that the shareholders rule should be abolished came as somewhat of a surprise. But you know, the stark reality of how blatantly disrespectful the discovery rule or shareholder rule is of the principle in Solomon. I must admit I wanted to kick myself for not recognizing this and not questioning the authorities that said just because the beneficiary of a trust is entitled to see the legal advice obtained by a trustee that the same applies in a company such that a shareholder should be allowed to see legal advice given to their company. You know, when all the case law confirms that shareholders have no legal beneficial or equitable interest in a company's property, which would include legal advice, I wonder how we could have not questioned that before now. Perhaps you can remind us of the findings in Jardine. Yes, as I mentioned earlier, the privy council in Jardine has now abolished the shareholder rule or disclosure rule. The so-called shareholder rule prevented companies from asserting legal advice privilates against their shareholders. Other than in the context of litigation between the company and a shareholder, the original basis of the rule was the shareholder's interest in the property of the company. But it's important to note that the origins of the shareholder rule predate Solomon. In the 2024 judgment in a bar holdings versus Lencourt, the high court of England and Wales found that the shareholder rule was unjustifiable as part of modern English law. In this case, the claimant, Abar Holdings, was the indirect holder of shares in Lencourt and listed PLC. Abar sought compensation under the UK Financial Services and Markets Act and a common law arising from alleged misstatements in prospectuses and other documents issued by Lencourt. Abar sought production of the documents from Lencourt for which Lencourt claimed legal advice privileged. Abar sought to rely on the shareholder rule. The court concluded that the shareholder rule's proprietary rationale was incompatible with post-Salman, separate, corporate legal personality. A rejected and alternative justification put forward for the shareholder rule on the basis of a joint interest privilege. An appeal by Abar to the UK Supreme Court earlier this year was rejected on the basis that the same issue would likely be resolved by the Privy Council in the Jardine proceedings. In Jardine, the Privy Council made the position definitive. In a unanimous judgment in the Privy Council was satisfied that the shareholder rule forms no part of the laws of Bermuda from where the appeal originated and that it ought not to continue to be recognised in England and Wales either. The Dardine case arose from a corporate amalgamation. A group of dissenting shareholders who disagreed with the price offered for their shares commenced proceedings under the Bermuda and Companies Act seeking a court determination of the fair value of their shares. The dissenting shareholders sought the disclosure of legal advice received by the company seeking to rely on the shareholder rule. The company Jardine claimed legal advice privilege over the advice but the Bermuda and Courts ordered to slosure. Jardine appealed to the Privy Council. In terms of the findings that the shareholder rule should no longer be applied, the Privy Council found that the real's original proprietary rationale is wholly inconsistent with the proper analysis with the registered company as a legal person separate from its members. Secondly, the notion of a joined interest privilege between a company and its shareholders put forward as an alternative basis for the shareholder rule was a serious oversimplification. Shareholders themselves are not always aligned. The judgment highlights us that directors of a large modern company face difficult decisions in ascertaining the company's best interests while paying attention to the interests of different stakeholders and that most of these decisions will require the benefit of candidate and confidential legal advice. Thirdly, a narrower fact-sense of joined interest exception would create unacceptable uncertainty resulting in directors having to make general assumption that they could never obtain legal advice in confidence. The ultimate result is practical, reflective of modern commercial reality and restores coherence with the principle in Salema. So, Suzanne, you mentioned that we can extrapolate from these recent decisions some practical takeaways for directors and particularly those involved in corporate groups. Yes, and in fact, some of the practical takeaways linked to the concept of separate legal personality might best be extrapolated from the recent Irish case in Dantel. A helpful reminder and a cautionary tale, particularly in the context of intergroup structures and transactions. Firstly, governance really highlights the importance of making company specific decisions, managing conflicts and of ensuring sufficient corporate benefit to the particular company. Secondly, the importance of maintaining books and records robustly documenting those decisions accompanied by transparent dislosures, including in financial statements. In Dantel, in addition to the primary finding, a failure to keep proper accounting records, the emission of material dislosures and failure to minute board meetings were identified as separate grounds of which the court was not satisfied that the directors acted responsibly. Finally, and again, flowing from the first two points, the importance of documenting intergroup transactions and arrangements on enforceable terms and avoiding disguised distributions. These are fairly basic points, as in, they're not rocket science, but it just goes to show how important the basics are in achieving good governance. I think most corporate failures ultimately come back to a failure in adhering to the basics. Of course, in 2025, we saw another raft of changes to the company's act 2014. So, Sam, what is the reaction of practitioners to the changes in the law to virtual hybrid meetings, the execution of the ceiling counterpart, the other exemption changes, etc? Yeah, well, the reintroduction of Section 43A, actually the pandemic provision, permitting execution under ceiling counterpart has been very welcome from a practical perspective. As it been the clarifications that a domestic merger may be conducted between two or more ducks, and for smaller companies, the changes to the audit exemption are welcome. While the provisions on virtual and hybrid meetings, which we discussed this time last year, Tom, I have now been placed in a permanent statutory footing, the property remains a preference, particularly amongst companies with a very large shareholder base for in-person ADMs. Now, there happens some EU developments to Suzanne, which were transcribed into Irish law in 2025. I'm thinking in particular of the Sustainable Reporting Obligations in part 28 of the Companies Act and the screening of third country transactions. Can you explain the significance of these practitioners? Yes, Tom. So, sustainability reporting obligations in accordance with the EU corporate sustainability reporting directive were introduced by a new part 28 of the Companies Act in July 2024. However, earlier this year, these reporting obligations were deferred for a large number of entities as a consequence of the ongoing EU-omni-based simplification exercises. Anomalies within part 28 were also addressed as part of the Irish Transposition of this deferral, which was welcomed. Separately, the screening of third country transactions Act 2023 was commenced with effect from the 6th of January of this year. This gives the Minister for Enterprise Tourism and Employment wide-ranging powers to review foreign investments which meet specified criteria, and ultimately to block investments that create national security and/or public order risks in Ireland. As such, considerations as to whether screening is required is now an important component of emanate transactions and of transaction planning. Thanks, Suzanne. That's very useful reminders. But, Tom, one of the most interesting EU company law initiatives which is coming down the track for 2026 is the proposed 28th regime. Can I turn the tables on you at this point, given that you know a little about the 28th regime, haven't been appointed Commissioner McGrath's special adviser on the 28th regime? And ask you to explain. Well, Suzanne, where do I start? Look at the outset. Can I say that the actual proposal is still being developed as we make this recording? So, I cannot do any big reveal now as to what the 28th regime will look like. That said, I'm very happy to share my thoughts on the concept of what it's trying to achieve and how it might be structured. So, we started the beginning. The origin of this proposal is Commissioner McGrath's mission letter which says he is to lead the work to build an EU-wide legal status to help innovative companies grow taking the form of a 28th regime to allow companies to benefit from a simpler, harmonious set of rules. From my first meeting with Mike McGrath when he asked me to become his adviser, I was struck by his passion and his commitment to making the EU a better place to do business for EU companies and to try to bring us close to, I suppose, what might best be described as an EU Delaware company model. An efficient, effective and business-friendly company-law regime can really play a key role in progressing the competitiveness agenda at EU level and the 28th regime is intended to provide the option for companies to set up and operate more easily across the single market. Under a single set of rules, there, boy, avoiding the fragmentation that currently exists and I think which has to be limiting the success of the European economy when you compare it to the likes of the US and China. In simple terms, we need to be able to allow founders and innovators to concentrate on winning markets for their goods and services and not having to try to navigate legal complexity. But as you're well aware, conceptually, the notion of an EU legal entity is not new. The original of the species is the SE or Societass Europae which was introduced after many, many decades by Council regulation in 2001. Now, by any standard, I don't think anyone could claim that the SE has been a success. Its take-up has been very low. One of the main criticisms of the SE is that it's like the Heinz tomato brand. Only in this case, it's 27 different varieties of SE, thankfully not 57. It all depends on the member station which the SE is registered. The key problem is that the Council regulations simply did not go far enough in describing the law applicable to SEs and this meant that National Member State Law had to step up to the line to supplement the law and that give rise to 27 different manifestations. There are other issues too which make it an attractive, high minimum share capsule requirement. The employee participation requirement which, while cherished in some member states, is considered to be singularly attractive in many of not most other member states and there were also two unsuccessful proposals for private limited EU entities. The SPE or European private company which was worked on in the early notches but died and a proposal for an EU subsidiary company in around 2012 which also came to nothing. In terms of structure, my preference would be for a regulation which would have direct effect across the EU but we need to go much further than the SE regulation did if we were to avoid having 27 different 28 regime companies. I'm very attracted by the notion of a legal instrument containing a model constitution or articles of association which I think can go a long way towards reducing the differences between the law applicable to EU inks as I think they may welcome to be called. I do not think it can have any minimum share capsule requirements as experience shows this simply doesn't afford protection to creditors and in fact it only serves to make incorporation cumbersome. I think digitization will be hugely important in the success of the EU ink. I think all or as many as possible filings should be digitized and the information on every EU ink and its constitution and all filed documents should be available to anyone throughout the EU by accessing a central database such as the likes of Briz. There remains a lot of work to be done but to my mind there are two key challenges. The first is the political one. There is strong support from the president of the commission Ursula Vanderlein who called out the importance of the 28th regime in her recent state of the union address and I was pleased to see the 28th regime feature prominently in the commission work program for 26 which was published only a week or two ago but I'm realistic to know that it will continue to be extremely difficult to convince member states to give up long held and even cherish concepts which they consider to be essential to the operation of a company law court. Employee participation minimum share capital are two which are to the forward here. A second challenge is logistics ideally the council regulation introducing the EU ink would be as comprehensive as parts 1 to 14 of the Irish companies act. The work involved in creating such a comprehensive legal statement even with 100% political buy-in is a very challenging project and when one considers how company law compliance and enforcement measures are largely rooted in criminal sanctions the challenge becomes even bigger. I'm working very closely with Kevin Barrett who is the cabinet expert for Commissioner McGress Cabanet and I'm very close to the process and very much aware of the challenges that we face but if we can persuade member states of the sea change and effective EU ink could bring for EU entrepreneurs I think it's a prize well worth fighting for. All of that said however I do remain confident that DJ just under Commissioner McGress leadership will deliver a worthwhile proposal for an EU ink but I do not underestimate the challenges Suzanne. Well I'll be watching this with interest Tom and I look forward to hearing more in trench 26. There are a number of other Irish company law legislation developments plans for 26 two Suzanne. Some provisions in the company's corporate governance enforcement and regulatory provisions act of 24 are still to be commenced and are there some changes planned for limited partnerships. Yes Tom so the company's corporate governance enforcement and regulatory provisions act 2024 is now largely in force having been commenced last year. The remaining provisions are expected to be commenced shortly including provisions related to prescribed form summary approval declarations. Aside from that in 2026 we can anticipate further bedding in if the amendments which have already come into effect. Progress is also anticipated in relation to the registration of limited partnerships and business names bill which would reform both the Limited Partnership Act 1907 and the registration of business names act 1963. The Co-opportune Society's bill has been included for priority drafting under the government's autumn legislative programme and will consolidate and update the legislation in this area. And returning to part 28 in sustainability reporting I think we can expect further amendments to the scope and substantive obligations following EU agreement and adoption of the revision's two CSRD as part of the ongoing omnibus simplification. Thanks Suzanne. Well that concludes this podcast of in company with Courtney and indeed of the series for 2025. Thank you very much Suzanne for joining me for this episode and hopefully you'll come back again this time next year. Thanks Tom well as always it was a pleasure to join you and I'd be delighted to join again next year. Our next episode will be in February 2026 when I will be joined by my friend and former partner in Arthur Cox William Johnston author of the inimitable banking and security law on Ireland second edition and we will be discussing some developments in company law concerning debentures security and registration of charges. I hope you can join us then can I take this opportunity to wish all of our listeners a very happy Christmas and a peaceful and prosperous 2026.