The Oireachtas has enacted the Companies (Miscellaneous Provisions) (COVID-19) Act (“the Act”) which provides for emergency measures for companies dealing with COVID-19 issues. These measures enable companies to hold electronic meetings so that directors and members of companies can adhere to social distancing guidelines.
The measures are to last for an interim period expiring on the 31 December 2020, though there is a provision for an extension of the interim period to no later than the 20 June 2021.
Execution of documents
During the interim period, companies will be able to execute documents under seal in different counterparts provided that one counterpart has the company’s seal affixed to it. The set of counterparts will then constitute a single document which will be as valid and effective as if it were executed in the normal course.
Companies will have until the 31 December 2020 to hold general meetings, with such meetings capable of being held electronically using online platforms such as Zoom or Webex. Such electronic general meetings must give all those entitled to attend a reasonable opportunity to participate, including notice of the electronic meeting and a mechanism for casting votes. Companies must guarantee the security of the platform used for the meeting, as far as reasonably possible.
Directors may cancel, change venue or change the means of holding the meeting up to one day before the scheduled date, if, in the opinion of the directors it is deemed necessary in order to comply with public health advice and to prevent and limit the spread of COVID-19. The Directors may also cancel a meeting at any time before the holding of the meeting where exceptional and unexpected circumstances arise.
The Act also facilitates the virtual holding of creditors’ meetings in voluntary and other liquidations, examinerships, statutory schemes of arrangement and other insolvency processes.
Withdrawal or amendment to dividend resolutions
Directors will be permitted to withdraw or amend dividend resolutions in circumstances where it was previously recommended that the company declare a dividend; and the directors have since changed their opinion following the issue of the notice of the general meeting.
If a company goes into examinership during the interim period, the examiner has up to 70 days to present a report to the court. Currently, an examiner can seek an extension of 30 days and this Act will provide an additional extension of 50 days (i.e. 150 days protection in total) to be granted by the court in exceptional circumstances. Such exceptional circumstances may concern but are not limited to the impact of COVID-19 on the company.
Increase in the threshold for creditors to wind up the company
Normally when a company is unable to pay a debt of €10,000 (or aggregable debts of €20,000) within 21 days it is deemed to be unable to pay its debts as they fall due. Under the Act, this threshold is increased to €50,000 before a creditor can petition the court to wind up the company during the interim period.
Directors of insolvent company to have regard to interest of creditors
The Act will also codify a director’s duty to creditors as the company approaches insolvency. Where a director breaches this duty and the company goes into insolvent liquidation, the director will be liable to indemnify the company for any loss or damage resulting from that breach.
These provisions will be of practical benefit to companies struggling to manage the effects of the pandemic. They will apply during the interim period only and will override the relevant provision of the company’s constitution.