The High Court has ruled that beneficial shareholders in Irish Life and Permanent Group Holdings were entitled to challenge a direction order connected with the State’s proposed investment of up to €3.8 billion in the group.
The Minister for Finance obtained the order without notice to shareholders on 26 July 2011 under the Credit Institutions (Stabilisation) Act 2010. It was intended to facilitate a State subscription for shares in Irish Life and Permanent Group Holdings, with funds needed to recapitalise its banking subsidiary.
The legislation allowed a “member” of the institution only five working days to apply to have such an order set aside.
Piotr Skoczylas and Horizon Growth Fund both filed applications within that period. However, their shares were held through nominees in electronic, or dematerialised, form. Their own names were not entered on the company’s formal register of members until September and October 2011.
The Minister argued that only the registered shareholder counted as a “member” under the legislation, relying on the Companies Act 1963. On that interpretation, Skoczylas and Horizon lacked standing and their challenges should be dismissed.
Mr Justice Feeney rejected that argument. He held that the 2010 Act was emergency legislation of a unique and unusually far-reaching kind. Direction orders could immediately interfere with property rights, yet affected parties had only five working days to seek court review and could lose the ability to pursue judicial review if they did not use that procedure.
Against that background, the judge held that “member” had to be interpreted purposively rather than confined to the Companies Act definition. It included the ultimate beneficial owners of shares whose economic rights were affected.
The ruling does not decide whether the 2011 direction order itself should be set aside. It settles only that Skoczylas and Horizon had standing to pursue their applications under section 11.