General scheme of new Irish company law bill to address certain COVID-19 related issues

Published 27 julio 2020

Introduction

The General Scheme of the Companies and Industrial and Provident Societies (COVID-19) (Amendment) Bill 2020 (the “Bill”) has been published by the Department of Business, Enterprise and Innovation. The Bill aims to address areas of concern in respect of operational matters arising as a result of the COVID-19 pandemic public health measures that are posing compliance issues for companies under the Companies Act 2014 (the “Companies Act”) and for societies under the Industrial and Provident Societies Acts 1893 to 2018.

The measures under the Bill are set to last for an interim period beginning on the date of commencement of the provisions of the Bill following enactment and ending on 31 December 2020. The interim period may be extended (once or several times) up to 30 June 2021. This article outlines key provisions of the Bill affecting Irish companies.

Documents sealed by companies

The Bill provides that any instrument to which a company’s common seal (or official seal for use abroad) is to be affixed may be signed and sealed in counterparts. Ordinarily, two directors or one director and the company secretary of a company are required to countersign one and the same document to which the company’s common seal is applied.

General meetings

The Bill sets out three proposed changes which will impact on general meetings.

1. It provides that a company need not hold an annual general meeting (“AGM”) within the time periods set out in the Companies Act or its constitution provided it holds its AGM by 31 December 2020 at the latest. In conjunction with this proposed amendment, the Bill dis-applies the requirement that the financial statements to be laid before the meeting are made up to a date no earlier than 9 months before the date of the AGM.
   
   
2. It provides that, notwithstanding the provisions of the Companies Act or a company’s constitution, general meetings shall not be required to be held at a physical venue or venues but may be fully conducted by electronic means provided all those entitled to attend have a reasonable opportunity to participate. Instead of specifying the place of the meeting, notices for electronic general meetings must specify “the methodology for participation”. The Bill also allows for general meetings to be cancelled, for changes in venue for physical meetings and for physical meetings to be changed to e-meetings and vice versa in order to comply with public health advice and sets out the manner in which such changes must be notified.
   
   
3. It allows a company’s directors to withdraw a dividend resolution or to reduce the dividend proposed to be declared by resolution at a general meeting after the notice of the meeting has issued where they are of the view that this is required due to the actual or perceived consequences of COVID-19 on the company.

Insolvency issues

Circumstances in which company deemed to be unable to pay its debts

The Bill modifies the circumstances in which a company will be deemed to be unable to pay its debts during the interim period. Usually, the service of a 21 day letter by a creditor who is owed more than €10,000 will result in a company being deemed to be unable to pay its debts and could trigger an insolvent liquidation. The Bill raises this threshold, for the duration of the interim period, to a debt of more than €50,000 in aggregate owed to one or more creditors.

Creditors’ meetings

The Bill facilitates the holding of creditors’ meetings in liquidations, examinations and other insolvency processes by electronic means.

Examinerships

During the interim period under the Bill, the maximum period of an examinership may, in exceptional circumstances and on application by the examiner to the High Court, extend from 100 to 150 days.

Duty to creditors on insolvency

The Bill provides for the insertion of a new provision in the Companies Act which will place a statutory fiduciary duty on directors of a company that is approaching insolvency to have regard to the interests of the company’s creditors and to preserve the company’s property. This will put the existing common law fiduciary duty on a statutory footing and will be a permanent change to the Companies Act as opposed to a temporary COVID-19 related measure.

Comment

The Bill comes as a welcome legislative response to some of the issues experienced by companies and company officers in connection with the COVID-19 pandemic. The Bill, when enacted, will facilitate companies in proceeding with business as usual and in complying with statutory duties under the Companies Act insofar as possible during these uncertain times. It is hoped that some of the provisions, particularly in relation to e-meetings, will provide a template for future permanent amendments to the Companies Act to facilitate electronic general meetings and creditors meetings in the ordinary course.

For more information or assistance please contact John Darmody, Senior Associate or another member of our Dublin Corporate and Commercial team.