The deadline of 31 December 2012 to adopt the Corporate Governance Code for Collective Investment Schemes and Management Companies (the Code) is fast approaching. The Code became effective on 1 January 2012, with a 12 month transitional period. Boards have been adopting and will continue to adopt the Code over the course of 2012. The first statement of compliance with the Code will be included in accounts with a year end after the adoption of the Code. Collective investment schemes (CIS) and management companies with a year-end of 31 December 2012 are working to ensure that the first statement of compliance is included in these financial statements under the requirements of the Code and subsequent guidance issued by the IFIA.

The significance of the code was highlighted in the address of Central Bank deputy governor, Matthew Elderfield to the IFIA on 12 September 2012; “I would like to commend IFIA and the funds industry more generally for rising to the challenge of developing its corporate governance code for fund service providers. This has helped raise standards in a pragmatic and sensible way. It has helped improve governance in the industry and provided a practical framework regarding the number of directors at funds….By tackling this issue head-on in its corporate governance code, IFIA has helped bolster the international reputation of the Irish fund sector. I should note that we will be revisiting our existing statutory codes for banks and insurance companies next year. We will use that process to review the success and take-up of the IFIA code.” Whilst the Code is voluntary, there is a strong expectation from industry and the Central Bank that it will be adopted.

Irish Stock Exchange listed corporate funds which are domiciled in Ireland must disclose details of corporate governance in the directors’ report of their annual accounts in accordance with the European Communities (Directive 2006/46/EC) Regulations 2009 (S.I. 450 of 2009). These funds have, in general, been referring to the earlier IFIA code in their accounts and, if and when they adopt the Code, will transition to referring to this Code. The Code operates on a “comply or explain” basis so that the board of a company which has adopted the Code and decides not to comply with any provisions must disclose the reasons for not complying in its directors’ report or on a publicly available medium (such as its website), the address of which will need to be included in its annual report.

The Code is a “framework ….which seeks to ensure that the CIS (or management company) is efficiently operated and exclusively operated in the interests of their investors” with its emphasis on demonstrable oversight by the board on the aspects detailed in the list below.

  • Board composition.
  • Appointment, training and departures of directors.
  • Time commitment of directors.
  • Restriction on number of non-investment company/management company directorships held by directors.
  • Chairman of the board.
  • Role of the board and the independent director.
  • Board meetings.
  • Board committees.
  • Delegation by the board.
  • Internal controls.
  • Conflicts of interest.
  • Schedule of matters reserved to the board.
  • Performance evaluations.
  • Accounting records, preparation and publication of financial statements, and external audit.
  • Compliance function.
  • Identification, monitoring and management of risks.