The coronavirus pandemic has placed an unprecedented strain on our economy and the way we do business. In an attempt to reflect this and adapt to the “new normal,” the government has introduced amendments to the Companies Act 2014 and the Industrial and Provident Societies Acts 1893 to 2018.
The Companies (Miscellaneous Provisions) (Covid-19) Act 2020 makes a number of allowances that aim to promote social distancing and limit the spread of the virus. It also provides relief to businesses that are struggling financially because of the pandemic.
The Oireachtas enacted this legislation on August 1. The measures it contains are intended to cease on December 31 of this year. However, the government may extend them beyond this date if circumstances so require.
If you need advice on how this new act affects your business, you should consult with one of our company law specialists. We’ll be able to tell you exactly how to use the new framework to your advantage.
Requirements in relation to general meetings have been relaxed considerably under the new legislation. AGMs can now take place on any date in 2020; the usual deadlines, whether from legislation or the articles of your firm, do not apply. The Act also allows participants in AGMs and EGMs to join the conference by video link, as long as the connection is of acceptable quality and all parties are given proper notice. Creditor meetings can now also take place by virtual means if all parties agree to this.
Directors can also postpone meetings or change their venue with as little as a day’s notice where they feel this is necessary to protect the health of participants. They may also cancel a general meeting, though only in “exceptional and unexpected circumstances.”
Section 10 of the Act provides for a reduction or cancellation of dividends that directors had proposed before the onset of the virus. The effect of the pandemic on the company can be “actual or perceived,” so there does not need to have been a measurable financial loss for this new rule to apply.
Examinership & Winding Up
In recognition of the financial hardship many businesses are currently facing, the new legislation has introduced more favourable winding-up rules for companies. The court can now protect businesses in examinership from creditors for an extra 50 days (on top of the current maximum of 100). A judge will only grant this extension if they are satisfied that the company’s circumstances are “exceptional.”
Under normal circumstances, a company is considered officially unable to pay its debts when it owes €10,000 to a single creditor or €20,000 to a number of creditors and cannot clear these amounts within 21 days. The Act increases this threshold to €50,000 for both individual and collective debts.
In order to promote social distancing, the Act loosens requirements around the processing of documents. While two directors (or a director and company secretary) are usually required to sign and seal a single document, Section 5 allows for valid execution with the signing of separate copies.
Staying Compliant During COVID-19
On balance, the new rules make life simpler for company directors in many respects. However, to take full advantage of the relief on offer, it might be a good idea to get the perspective of a company law expert.
Get in contact today to discuss your situation with one of our solicitors. We are based in the South East of Ireland.