A new voluntary corporate governance code for the Irish funds industry has been finalised, in draft, this month by the IFIA (the Irish Funds Industry Association). The draft code was prepared in response to an invitation to the IFIA by the Central Bank in April 2010 to formulate such a code, given the increased focus on corporate governance both nationally and internationally in recent times.
The code applies to Irish authorised collective investment schemes and management companies. The code is to be a voluntary one and, it states, "is not intended to be prescriptive, rather a codifying of existing practice combined with what is seen as best international practice".
It operates on a similar "comply or explain" basis to other corporate governance codes, in that where the board of any company decides not to comply with any provision of the code, it should set out the reasons for not so complying in its directors' report or on its website.
The code deals with those areas which one would generally expect to see in any guide on corporate governance, and in particular sets out various provisions on:
- the composition of the board of directors;
- the need for directors to have sufficient time to carry out their duties; conflicts of interest with directors;
- directors' duties;
- the roles of the chairman and the independent directors;
- the functions and operation of the board;board appointments;
- the frequency of board meetings, the keeping of minutes, and directors' participation in meetings;
- reserving powers to the board;
- board committees;
- proper delegation by the board;
- the keeping of accounting records, the preparation and publication of financial statements, and the external audit;
- the compliance and risk management functions of the board; and the need for proper internal controls.
The draft code envisages that its provisions should become effective on 1 September 2011 and refers to a transitional period of 12 months, although no detail is as yet set out on the transitional arrangements.
The Central Bank had previously suggested that following a trial period, a survey of the code's application and compliance should be undertaken and a report made to the Central Bank, but no mention of this is made as yet.