O'Reilly's €1.87m deal 'unlawful'

A payment of €1.87 million made to former Independent News & Media chief executive Gavin O'Reilly on his departure last week was unlawful, 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 the payment breached Section 186 of the Companies Act because it was approved by the board without being put before the company's shareholders at a general meeting.

Rossa Fanning, for Mr Connolly, secured permission from Mr Justice Peter Kelly today 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 Gavin O'Reilly and his replacement by Vincent Crowley as chief executive of INM, Mr Fanning said.

Mr Connolly - a chartered accountant, director of Commmunicorp Group and a non-executive director of IN&M since 2009 - and another director voted against the €1.87m 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 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.

There was an AGM of the company scheduled for June 18th next 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 unalwful, 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 said he understood the board was advised the payment was to be compensation to compromise any claims Mr O'Reilly could bring against IN&M were he dismissed.

Because Mr O'Reilly lives in London, does not ordinarily work here and some 70 per cent 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 Connolly also claims the €1.87m payment was an extremely large sum because Mr O'Reilly had no executed contract of employment.