Markets
Ireland: the section 1023 directors' statement
A company on Euronext Dublin can issue a convertible priced against future market prices and can run a standby equity facility inside its allotment authority. Irish law sets no pricing formula and no maximum discount. Section 1023(7) of the Companies Act 2014 disciplines both: the disapplication resolution needs the directors' recommendation and a written statement justifying the amount to be paid, an amount a floating price has not yet produced.
Key takeaways
- The statement is the Irish gate. A special resolution disapplying pre-emption “shall not be proposed unless it is recommended by the directors”, and unless a written statement has been circulated setting out their reasons, the amount to be paid to the PLC, and their justification of that amount.
- Getting it wrong is an offence. Section 1023(8) makes it a category 3 offence to include a matter known to be false or misleading in that statement. It is not a formality that in-house counsel can paste from last year.
- The disapplication dies with the allotment authority. Under section 1023(5) the power ceases when the section 1021 authority is revoked or expires, and may be renewed only for a period no longer than that for which the authority is renewed.
- Pre-emption itself has a 14-day floor. Section 1022 requires an offer pro rata to nominal value held, on the same or more favourable terms, stating a period of not less than 14 days for acceptance, and it may not be withdrawn before that period ends.
- One open question decides the drafting. Whether Irish equity securities extend to a right to subscribe for or convert into shares, as section 560 of the UK Act expressly does, determines whether pre-emption is tested once at grant or again at each conversion.
How a Dublin issue is authorised
An Irish PLC needs two things before new shares reach an investor. Section 1021 of the Companies Act 2014 supplies the authority to allot. Section 1022 then imposes the statutory pre-emption right: equity securities allotted for cash must first be offered to existing holders in a proportion as nearly as practicable equal to the proportion in nominal value they hold, on the same or more favourable terms, stating a period of not less than 14 days for acceptance and not withdrawable inside it. Two carve-outs matter: securities paid up otherwise than in cash, and employees' share schemes.
Section 1023 is the release valve, and it is where Ireland stops resembling anywhere else.
A statement that has to justify a price nobody knows yet
Section 1023(7) is short and consequential. The special resolution disapplying pre-emption may not even be proposed unless the directors have recommended it and have circulated a written statement setting out three things: their reasons, the amount to be paid to the PLC in respect of the equity securities to be allotted, and their justification of that amount.
A market-referenced conversion price is, by construction, an amount that does not exist when that statement is written. It is a formula whose output depends on where the shares trade months later. So the Irish question is not whether floating pricing is lawful — nothing forbids it — but how a board states and justifies an amount that is a method rather than a figure, in a document carrying a criminal sanction under section 1023(8) if knowingly false or misleading. That pushes a board towards describing the mechanism, its floor, its cap and its worst case, and it means the resolution is drafted with the instrument in front of it, not before.
| Provision | What it does | What limits it |
|---|---|---|
| Section 1021 | Authority for the directors to allot relevant securities | The period fixed by the members |
| Section 1022 | Statutory pre-emption on cash allotments | Offer pro rata to nominal value, open at least 14 days, not withdrawable |
| Section 1023(4) | Disapplication or modification of section 1022 by special resolution | 75% of votes cast |
| Section 1023(5) | Duration of the disapplication | Ends with the section 1021 authority; renewable only for the same period |
| Section 1023(7) and (8) | Directors' recommendation and written statement | Reasons, the amount to be paid, the justification; category 3 offence if knowingly false |
| Statutory summary only. The constitution of the PLC and the terms actually voted govern. | ||
Two things this page does not decide
The first is whether Irish “equity securities” carries the same extended meaning as its UK cousin. Section 560 of the UK Companies Act 2006 says in terms that equity securities include rights to subscribe for or convert securities into ordinary shares, that granting such a right is an allotment, and that the later allotment on exercise is not — which is why a UK convertible is tested for pre-emption once, at grant. Whether section 1022 reaches the same result is not settled on this page, and it is the difference between one resolution and a series of them.
The second is capacity. London caps a discounted placing at 10% of the middle market price unless a general disapplication is already in force. Whether the Euronext Dublin rule book keeps an equivalent could not be established from the rule book itself, so no Irish discount position is stated here either way. Both questions go to Irish counsel first.
Dealing, and the prospectus
Once admitted to trading on the Main Securities Market or Euronext Growth Dublin, the new shares rank with the existing line. Ireland has no holding period and no resale registration, so the machinery on Rule 144 and restricted securities is relevant only to a US-connected holder. The gate is the prospectus threshold, which the EU Listing Act raised to 30% of the class already admitted over 12 months, with a short summary document filed rather than approved. For the instrument side, see convertible notes for listed issuers and committed equity facilities.
General information, not legal advice. Sections 1021 to 1023 of the Companies Act 2014 are summarised from the revised statute. The reach of the Irish definition of equity securities, and the Euronext Dublin position on discounted placings, are both unresolved here. Take advice from qualified Irish counsel before acting.
Send the current allotment authority, its expiry and the last section 1023 statement and we will structure inside them.
Sources
- Companies Act 2014, section 1022 (revised)
- Companies Act 2014, section 1023 (revised)
- Directive (EU) 2017/1132, Article 47
- Central Bank of Ireland — prospectus regulation
Financing an Irish listed issuer: frequently asked questions
Does Irish law fix a minimum conversion price?
No. Neither the Companies Act 2014 nor any Irish pricing rule found for this page sets a minimum issue price by reference to a trading average, and no maximum discount applies as a matter of company law. The floor that does apply is the European one: shares may not be issued below their nominal value or accountable par.
What has to be in the section 1023 directors' statement?
The statement circulated with the special resolution must set out the directors' reasons for making the recommendation, the amount to be paid to the PLC in respect of the equity securities to be allotted, and the directors' justification of that amount. Knowingly or recklessly including a false or misleading matter in it is a category 3 offence.
How long does an Irish pre-emption disapplication last?
It is tied to the allotment authority it accompanies. The power ceases when that authority is revoked or expires, and it may be renewed only for a period no longer than the period for which the authority itself is renewed. A multi-year facility therefore depends on annual renewal, not on the facility agreement.
Are shares issued to an investor in Ireland freely tradable?
Yes, once admitted to trading. Ireland has no holding period and no resale registration concept, so the shares rank with the existing line. The gate is the prospectus analysis on the follow-on admission of a class already admitted, which the EU Listing Act loosened.
Talk to us
How much section 1023 disapplication is still live?
Section 1022 gives Irish shareholders pre-emption on a cash issue, and section 1023 sets it aside only on a directors' written statement justifying the amount to be paid. Send the resolutions in force and the AGM date.