Telecom ruling eases fears over flotation

The High Court yesterday alleviated some concerns about the Telecom Eireann share flotation.

Telecom shareholders, including the company's employees' trust, and two Government Ministers were concerned at the discovery that Telecom had not been informed formally of the shareholding agreements entered into with the Government when Telecom went public in 1996.

Mr Justice Kelly said it was clear the flotation had given rise to the application to regularise any possible defects in the situation because of an anxiety to ensure there was no doubt or question regarding the interest or disposal of the shares.

The judge was satisfied that if there was a failure to comply with statutory requirements it was due only to inadvertence and that nobody was prejudiced. The applications were brought on behalf of the Ministers for Finance and Public Enterprise who had sold Telecom shares before it became a public company in December 1996 and by companies which bought the shares.

The first application yesterday was on behalf of Comsource which acquired 88,313,068 shares at £1 in Telecom (20 per cent of the issued share capital), Telia Holdings Ireland AB (a Swedish company), Ierland (sic) Holding Company BV, KPN Telecom (a Dutch company).

In November 1996, Comsource, a private unlimited company organised under Irish law, entered into an agreement with the Dutch and Swedish companies. Under the deal with the government, Comsource also had the option to buy a further 15 per cent of Telecom's share capital.

The second application yesterday was on behalf of the two Government Ministers and concerned transactions involving the Telecom Eireann Employee Share Ownership Trust.

The Government last month agreed to sell 9.9 per cent of Bord Telecom's issued share capital and up to an additional 5 per cent subject to certain terms and conditions to the trust.

The Ministers and Comsource believed they might have been obliged under the 1990 Companies Act to notify Telecom of the transactions once Telecom had become a public limited company.

Mr Justice Kelly said the anxiety arose out of a possible failure to comply with the notification provisions in Chapter 2, Part 4 of the 1990 Companies Act which he described as "quite detailed and technical". It was clear that a failure to comply with them had serious consequences.

These consequences were contained in Section 79(3) of the 1990 Act. A failure to comply gave rise to the following: "No right or interest of any kind whatsoever in respect of any shares in the company concerned, shall be enforceable either directly or indirectly by action or legal proceeding."

He said the court had a discretion to give relief from the consequences of the disabilities in Section 79(3). He was satisfied that if there was any failure to comply with the notification provisions it was due to inadvertence and that nobody had been prejudiced or was likely to be prejudiced as a result of that failure.

In the circumstances, it was just and equitable to grant the relief sought.