Construction BUSINESS

The Commercial Court recently heard arguments regarding Walls Construction’s proposed growth share scheme, which aims to retain key personnel and incentivize management to achieve financial targets. The Irish building firm, with a substantial turnover of €472 million in 2022, seeks to implement this scheme to ensure appropriate succession management and future business success.

The scheme, designed to grant equity to the next generation of management, triggers economic rights contingent upon meeting specific financial goals. While Walls Construction asserts that it has the necessary shareholder and company consent for the scheme, McSorley Investments Limited, holding a 20% stake in the company, raised concerns over potential dilution of its interests.

McSorley Investments, established to manage Walls Construction Holding Limited (WCHL) shares, initiated High Court proceedings, fearing oppression and dilution of its stake if the scheme proceeds. Eugene O’Shea, Chief Executive of Walls Construction, emphasized in an affidavit that the scheme is crucial for ensuring the company’s continuity and future success.

The proposed scheme, involving the issuance of growth shares representing 20% of WCHL, aims to align the interests of future managers with those of shareholders. However, before its approval, McSorley Investments filed for an injunction to halt the scheme’s implementation, leading to a delay in board meetings scheduled for its approval.

Despite assurances that the scheme would not proceed until the injunction’s determination, Walls Construction highlights the urgency of its implementation. The defendants argue that the scheme aligns with a 2015 agreement governing the company’s operations and shareholder relations.

McSorley Investments expressed its consent to admit the case to the Commercial Court, which expedites legal proceedings. However, both parties agreed to explore out-of-court mediation to resolve the dispute. Mr. Justice Denis McDonald deemed mediation a sensible step, hoping for a successful resolution.

McSorley Investments, while supporting a management incentive scheme, raised concerns over potential unfairness to existing shareholders and tax implications. PJ Walls, a director of both McSorley Investments and WCHL, alleged that the defendants’ actions were oppressive, forcing a dilution of shareholding.

The case underscores the importance of balancing the interests of existing shareholders with incentivizing future management, reflecting the complexities involved in corporate governance and succession planning within family-owned enterprises.