The Court of Appeal has dismissed an appeal by four shareholders challenging the 2011 order that enabled the Minister for Finance to recapitalise Irish Life and Permanent (ILP) and acquire more than 99% of its holding company.
The appeal concerned a statutory application to set aside the direction order under section 11 of the Credit Institutions (Stabilisation) Act 2010. The court held that the shareholders had not established that the Minister’s opinion was unreasonable or affected by an error of law. It therefore refused the relief sought and left the order in place.
The order was made by the High Court on 26 July 2011, following a requirement by the Central Bank that ILP raise €4 billion in capital by the end of that month. The Court of Appeal recounted evidence accepted in the High Court that ILP could not raise the required funds from private investors or existing shareholders in time, and that failure to recapitalise risked the bank’s collapse and significant consequences for the State.
The shareholders argued, among other things, that the capital requirements were excessive, that the share price used for the State investment was artificially depressed, and that less harmful options were available. They proposed measures including a pre-emptive offer allowing shareholders to buy shares, or a class of “B” shares that could be bought back if the bank recovered. These were their submissions, not findings accepted by the court.
The appeal followed two High Court judgments dismissing the shareholders’ case. The Court of Appeal also considered a prior ruling by the Court of Justice of the European Union, which had held that the Second Company Law Directive did not preclude an exceptional measure of this kind during a serious disturbance to a member state’s economy and financial system. The Irish court said it was bound by that ruling on the EU-law issue, while separately considering the challenge under domestic administrative and constitutional law.
The Court of Appeal treated the order as a compulsory takeover affecting the shareholders’ property rights and applied a proportionality analysis. It concluded that a pre-emptive offer was impracticable given the short deadline and the time and cost involved. It also found that rejecting the B-share option was not unreasonable, given the bank’s financial condition and the State’s exposure. The court rejected the claim that the State had created a false market, accepting the High Court’s finding that the share-price fall reflected the market’s response to the published stress-test results and recapitalisation requirement.
The ruling addresses the appeal over the section 11 challenge. Separate High Court proceedings concerning the constitutionality of the 2010 Act were still unresolved, and the Court of Appeal expressed no view on them.