by Ken Casey , Matthew Austin August-31-2020 in Commercial & Business, Corporate Governance, Corporate, COVID-19
Introduction
The Minister for Business, Enterprise and Innovation has issued the order necessary for the Companies (Miscellaneous Provisions) (COVID-19) Act 2020 (the “Act”) to become effective from 21 August 2020. The Act makes important changes to Irish company and insolvency law and amends the Companies Act 2014 (the “Companies Act”). These changes are very welcome and ones which company directors, insolvency practitioners, receivers, liquidators and examiners should be aware.
The provisions of the Act apply for an ‘interim period’ ending on 31 December 2020 but can be extended to 30 June 2021 based on the Government’s re-evaluation of the public health and economic situation.
Shareholder Meetings and Creditors’ Meetings
The Act relaxes certain procedural formalities for convening and conducting EGMs, AGMs, class meetings and creditors’ meetings to enable companies to comply with physical distancing requirements. These measures override provisions in a company’s constitution so that during the interim period:
- A company that is due to hold its AGM in 2020 may postpone it to a later date, up to 31 December 2020;
- AGMs, EGMs, class meetings and creditors’ meetings may be conducted either partly or wholly by electronic/virtual means such as Zoom (with no physical venue), provided all attendees are given a reasonable opportunity to participate. Each participating member or their proxy shall be counted in the quorum for the meeting;
- Companies may impose proportionate restrictions which are necessary to ensure the identity of attendees and the security of the electronic communications technology being used;
- Notices of shareholder meetings, in addition to the other means permitted by the Companies Act and by a company’s constitution, may now be given on the company’s website, by email to shareholders and in a national newspaper; and
- Directors will be able to cancel an AGM, class meeting or EGM; or change its venue, date and/or means of holding it, as long as notice is given of the change by the end of the day prior to the day of the meeting and the change is made in order to comply with public health guidance.
Although in practice many companies and creditors (see our recent article and related ICAI guidance) have adapted their procedures for holding meetings since the onset of the COVID-19 restrictions in March, the new flexibility provided by the Act is very welcome.
Dividends
Directors may withdraw a previously agreed resolution to declare a dividend at a general meeting; or propose an amendment to that resolution to provide instead for a dividend less than that initially recommended.
The benefit of this measure is limited in scope due to the strict conditions attached to its exercise:
- all the members of the company must agree to the withdrawal or amendment of the resolution in writing;
- all of the directors must form the opinion that this course of action is appropriate due to the impact of the pandemic on the affairs of the company; and
- notice of the proposed withdrawal or amendment needs to be given no later than 3 days before the general meeting.
Execution of Documents
Travel restrictions and increased remote working have made it difficult for many companies to comply with the Companies Act formalities in relation to the execution of documents under company seal. Currently, documents which are required to be executed under seal must be signed by a director and countersigned by another director or the company secretary all on the same page as the affixation of the seal. This has been difficult to comply with where the company seal, directors and secretary are not located in the same place.
The Act now allows the company seal and each of the signatures required to appear on separate documents (referred to as ‘counterparts’) and be considered as one single document for the duration of the interim period.
Insolvency
Winding Up
Under the Companies Act a creditor can petition the Court to have a company wound up for being unable to pay its debts where a debt which exceeds €10,000 (or €20,000 in the case of two or more creditors acting together) which has been demanded, has not been paid.
During the interim period, the minimum debt threshold has been increased to a single threshold of €50,000.
Examinership
The Act also increases the court protection period for the examiner of a company, which goes into examinership during the interim period, to submit their examiner’s report to the court. Under the Companies Act, an examiner is currently allowed 70 days in which to submit the examiner’s report with the potential for an extension of 30 days following a successful application to the court (that is, a maximum period of 100 days).
For the duration of the interim period, the Act will increase the maximum period from 100 to 150 days if the court is satisfied that exceptional circumstances exist. The Act defines ‘exceptional circumstances’ to include, but are not limited to, the nature and impact of COVID-19 on the company.
The extended period of time in which to submit the examiner’s report will allow examiners to better gauge the future viability of the company, negotiate with potential investors and have the benefit of more information regarding market conditions in what is an overall climate of uncertainty and instability in formulating a rescue plan. The longer period of time is potentially very useful in giving examiners more time for negotiation with creditors, in particular in more complex examinerships.
Codification of director’s duty to have regard to creditors’ interests
An earlier proposal to codify the common law director’s duty to have regard to the interests of creditors of a company was omitted from the final Act but is under further review with other potential changes to alleviate some of the impact of the economic difficulties arising from the COVID-19 business environment. We will update you on these further developments as they emerge.
Conclusion
The Government’s implementation of these temporary changes to the Companies Act is very welcome. It is a pragmatic and swift response to the challenges faced by Irish companies.
For further information about any of the above, please contact Ken Casey kcasey@hayes-solicitors.ie or Matthew Austin maustin@hayes-solicitors.ie.
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About the Authors
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Ken Casey
Ken is Head of the Corporate team and has built a practice in acquisitions, disposals, and capital markets transactions across various industry sectors; joint ventures and corporate re-organisations of publicly quoted and private companies; and advises on corporate governance and general corporate law. He has extensive expertise in the financial services, aviation, gaming, technology, media and sports sectors.
Matthew Austin
Matthew is a partner in the Commercial & Business team and has considerable expertise in a range of practice areas, having acted for Irish and International clients in domestic and multi-jurisdictional issues. Matthew has advised in civil and administrative law disputes and in regulatory and advisory matters including insolvency/restructuring, IP, defamation and media law, competition and consumer protection and data protection.