O’Reilly paid €1.87m in ‘indecent haste’

A payment of €1.87m made with “indecent haste” to former Irish News & Media chief executive Gavin O’Reilly on his stepping down last week was unlawful and also unjustified where he presided over “a period of destruction” of the company’s share value, a non-executive director of the company has alleged.

Paul Connolly, one of two directors on the INM board representing the company’s biggest shareholder Denis O’Brien, has brought High Court proceedings seeking declarations the payment breached Section 186 of the Companies Act as it was approved by the board without being put before the company’s shareholders at a general meeting.

Rossa Fanning, counsel for Mr Connolly, secured permission from Mr Justice Peter Kelly yesterday to apply next Monday to have the proceedings, which are against INM only, fast-tracked in the Commercial Court.

The case arose from the payment approved following the resignation of Mr O’Reilly and his replacement by Vincent Crowley as chief executive of INM, Mr Fanning said.

Mr Connolly, a director of Communicorp Group and a non-executive director of INM since 2009, and another director, voted against the payment.

In court documents, Mr Connolly said he believed the payment should first be approved by a general meeting, had communicated that view to the board and told it he intended to take advice but was told the board’s advice was it could approve the payment. He was later informed the payment would not be referred to a general meeting and had already been made on Apr 19, the same day it was approved, counsel said. It was his case the payment was made with “indecent haste”.

This case involved a net point, whether Section 186 of the Companies Act 1963 required such a “compensation” payment to be approved by members of a company at a general meeting.

Mr Fanning said Mr Connolly also believed the payment was unduly generous because Mr O’Reilly’s term as chief executive was unhappy, involving two profit warnings.

There was an AGM of the company scheduled for Jun 18 and his client hoped the payment could be raised at that and in those circumstances, wanted to have the case addressed urgently in the Commercial Court. If the court granted a declaration the payment was unlawful, then Mr Connolly would expect the board to refer the matter to the AGM despite the payment having already been made.

In the proceedings, Mr Connolly claims the board chairman James Osborne told him the legal advice was the payment could be lawfully made by the board of directors.

Mr Connolly said he understood the board was advised the payment was to be compensation to compromise any claims Mr O’Reilly could bring against INM were he dismissed.

Because Mr O’Reilly lives in London, does not ordinarily work here and some 70% of his remuneration from INM was paid to a Jersey-registered company, Mr Connolly contends there is serious doubt whether Mr O’Reilly could avail of the protections of the Unfair Dismissals Act.

Mr O’Reilly also should not have been rewarded for presiding over “a period of destruction” of the company’s share value, he said.

The performance of INM had been “extremely disappointing” in recent years with its share price falling from a high of €15.98 on the Irish Stock Exchange in Jun 2008 to 21c on Mar 30.