PTSB Shareholders Oppose Breaches of EU Law by the Irish Minister for Finance
The Irish Minister for Finance (the "Minister") effected on 26 July 2011 an ex parte direction order (the "July 2011 Ex Parte Direction Order"), which reduced forcibly the stake of the original shareholders in Permanent TSB Group Holdings plc ("PTSB GH" or "PTSB Holdings") from 100% to less than 0.8% for the benefit of the Minister. Having regard to the fundamental principle of proportionality of EU law (as applied to actions of Member States), the Minister committed breaches of the most fundamental provisions of the EU law.
PTSB Holdings' shareholder base has been always extremely fragmented, with no shareholder ever holding more than a very small stake in the Company. Therefore, there are 135,000 small individual shareholders worldwide (including more than 100,000 in Ireland), many of whom are pensioners and former employees of PTSB Bank. As a result of the Minister's actions, a large number of small shareholders lost their livelihoods.
Breaching EU law is illegal. EU law has primacy over national laws of EU Member States. Consequently, the Irish High Court was unable to uphold the legality of the July 2011 Ex Parte Direction Order following the hearing in January and February 2014, and referred the matter to the European Court of Justice, where it will be ruled upon under the record number C-41/15 (Dowling and Others v. Ireland).
The crux of the matter is the fact that the Minister forced an increase in capital in PTSB Holdings by way of a so-called ex parte direction order (i.e. a ministerial decision that was practically automatically endorsed by the court without any possibility whatsoever for the affected parties to object at the time of the court's endorsement); the Minister effected the said ex parte direction order in a manner incompatible with the following provisions of the Second Council Directive, having regard to the fundamental principle of EU law (as applied to actions of Member States):
1. The Minister breached Article 25(1) of the Directive, because the said Direction Order forced an increase in the capital in PTSB Holdings, against the respective decision of an EGM, by an issuance to the Minister of more than 36 billion new shares, causing a massive dilution to the existing shareholders; and
2. The Minister breached Article 29(1) of the Directive, because the said Direction Order deprived the shareholders in PTSB Holdings, against the respective decision of the EGM, of their pre-emption rights, as the existing shareholders were not offered shares on a pre-emptive basis in proportion to the capital represented by their shares; and
3. The Minister breached Article 8(1) of the Directive, because the above-mentioned direction order changed, against the respective decisions of the EGM, the Memorandum and Articles of Association (i.e. the Constitution) of PTSB Holdings and reduced the legally fixed nominal value of the share from 32 cents to 3.1 cents in order to enable the Minister to immediately subscribe for new shares at 6.345 cents (i.e. below the original nominal value of 32 cents).
It is important to note that challenging the Minister's illegal takeover of PTSB Holdings does not mean challenging the recapitalisation (i.e. the legally required increase of the capital buffer) of PTSB Bank, which is a bank wholly-owned by PTSB Holdings. PTSB Holdings and PTSB Bank are two separate entities with separate capital and separate Boards. PTSB Holdings has 135,000 shareholders worldwide and PTSB Bank is not a listed company. The recapitalisation of the PTSB Bank should have - and could have - been effected in a manner compatible with EU law. In particular, there was no legitimate reason to funnel through PTSB Holdings the funds to recapitalise PTSB Bank, against the respective decision of the EGM of PTSB Holdings. Furthermore, there was no legitimate reason to abrogate mandatory pre-emption rights of the shareholders in PTSB Holdings or to lower the nominal value of the PTSB Holdings share, against the respective decisions of the EGM. There has never been any obligation under EU law to effect those measures the way the Minister did it, i.e. in a manner incompatible with EU law. There was no reason whatsoever for the Minister to appropriate more than 99% of the separate capital of PTSB Holdings, i.e. €432 million (attributable in whole to the original shareholders), which was not even used for the recapitalisation of PTSB Bank and which is now unlawfully attributable to the Minister.
The comprehensive case law of the Court of Justice of the European Union (the “CJEU”) and the relevant documents issued by the European Commission make it clear that the Minister acted illegally. The relevant CJEU case law comprises, inter alia, seven consistent rulings of the CJEU between May 1991 and December 2008.
A small group of shareholders in PTSB Holdings (the "Shareholder Litigants"), led by Piotr Skoczylas of Scotchstone Capital Fund Ltd, has been fighting the Minister / the Irish State in courts regarding, inter alia, the Minister's aforementioned takeover of the 99.2% of the PTSB Holdings paid-in capital. The court proceedings against the Minister are still ongoing. However, the Shareholder Litigants have already achieved certain important milestones. In particular, following the latest three-week hearing in January and February 2014, the Irish High Court has been unable to uphold the legality of the July 2011 Ex Parte Direction Order. On 12 November 2014, the High Court ordered that the Court of Justice of the European Union (the "CJEU") be asked to interpret EU law and, in effect, determine legality of national measures such as the said ex parte direction order. References to the CJEU are rare in Ireland.
In the above context, this website describes briefly (and non-exhaustively) selected key aspects of the legal proceedings against the Minister. The website has been created primarily for the benefit of the shareholders in PTSB Holdings, who collectively represented 100% of the company's voting share capital before the July 2011 Ex Parte Direction Order.
It is critically important that the affected shareholders in PTSB Holdings close ranks. The more united the shareholders are, the more effective they can jointly be in influencing the current situation. All the shareholders may benefit from extending a shareholder coalition of common interest. Please provide your feedback via the feedback form available at "Your Feedback" tab. Additionally, please do not hesitate to contact us if you have any questions.
The information provided on this website is provided for general information purposes and/or as a general commentary only, and does not constitute a legal or professional advice or an offer or solicitation of any sort. By providing your feedback, you would be expressing your views, which will contribute towards extending a shareholder coalition of common interest.
By using this website, you acknowledge your assent without any limitation or qualification to the information and conditions of use, which are provided in the "Disclaimer" at the bottom of each of the web pages on this website . Please read the Disclaimer carefully.
Certain matters related to the court proceedings against the Irish Minister for Finance continue to be subject to further court proceedings. In addition to proceedings regarding the setting aside of the July 2011 Ex Parte Direction Order, there are also proceedings regarding the appropriation and then re-sale by the Minister of Irish Life, which used to be a (very profitable) insurance arm of PTSB Holdings, as well as proceedings against selected directors of PTSB Holdings, who, in following the Minister's directions without sufficient legal scrutiny legally required of them, are alleged to have acted unlawfully and committed violations, some of which are classified under the Irish law as indictable offences punishable by a significant fine and/or, at the discretion of the court, by up to 5 years of imprisonment.
Nothing in this website should be misconstrued as prejudicing or contradicting the position of the Shareholder Litigants in any court proceedings.
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Former Director of
Permanent TSB Group Holdings plc
Flynn & O’Donnell Solicitors
10 Anglesea Street
Dublin 2, Ireland