O'Reilly €1.87m deal 'unlawful', board director tells High Court

A PAYMENT of €1.87 million made with “indecent haste” to former Independent 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 before the High Court.

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

Rossa Fanning, 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. Mr Connolly – a chartered accountant, director of Commmunicorp Group and a non-executive director of INM since 2009 – and another director voted against the €1.87 million 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. He was told the board’s advice was that 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 April 19th last, 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 the 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.

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

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.