In response to the challenges faced by businesses in 2020, the Irish government have made exceptional provisions to the Company's Act 2014 that considers public safety as a priority.
Signed into law on August 1, the Companies (Miscellaneous Provisions) (COVID-19) Act 2020 includes various provisions designed to support businesses to continue operating under these challenging times, including to help otherwise viable businesses that are under threat of insolvency.
The Act includes concessions for companies seeking to comply with:
- rules for company meetings,
- Ireland's insolvency rules, and
- the rules regarding the preparation of official documents.
- The updates made by the Act to the Companies Act 2014 are temporary and will be in place until December 31, 2020, unless extended.
Rules for meetings
The Act provides that AGMs and other types of meetings can now be held online, as long as all those in attendance are able to participate and vote.
The legislation also extends the deadline for AGMs to take place to the end of 2020, allowing companies to disregard deadlines set under their constitutions, or other rules on this set out in the Companies Act 2014, where they need to. Meetings can also be cancelled, rearranged, moved to a different venue, or moved online, where there is a public safety concern.
Regarding dividend distributions, under certain quite tightly regulated circumstances, a recommendation to distribute a dividend can be rescinded or the amount reduced, specifically where COVID-19 is deemed to have had a material impact on a company's finances.
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Insolvency law changes
In terms of restructuring and insolvency procedures, the new legislation seeks to protect otherwise viable firms to the fullest extent possible.
To this end, the Act increases the amount of debt a company can owe specific creditors before they may argue the company cannot pay its debts to EUR50,000. Previously, this threshold was set at €10,000 where a single creditor was petitioning, and EUR20,000 where two or more lodged a petition together.
The legislation also increases the examinership period (whereby a company, with protection from the courts, can try to secure investment or otherwise bring its financial affairs into order with its assets temporarily protected, its creditor balance reduced, and the company directors remaining in charge of operations) from 100 days to 150 days, upon court order.
This aims to give companies in this position longer to complete complex negotiations and to potentially restructure or obtain further investment. However, the new law imposes additional fiduciary duties on directors to ensure that company assets are protected and that the interests of creditors are considered in any insolvency or restructuring proceedings.
Preparing official documents
Finally, the legislation contains measures to facilitate the execution of documents where the physical infrastructure of companies and their personnel may not be in their usual locations, or where key persons are unable to meet.
In particular, the Act allows for the use of counterparts for documents signed 'under company seal'. Generally, two directors of the company, or a director and the company secretary, are required to countersign documents to which a company seal is then applied. Temporarily, key persons can now sign separately.
The measures contained in the Act will allow companies in Ireland to remain compliant with company law, protect firms and ensure that the safety of those involved is considered.
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