The Act makes temporary amendments to the Companies Act 2014 (the 2014 Act) and the Industrial and Provident Societies Act 1893. All of these apply for an "interim period", expiring on 31 December 2020 (unless extended by Government).
Our two-part review of the Act begins with a consideration of its corporate governance provisions, as they relate to the 2014 Act. The Act also provides for some amendments to insolvency law, which will be covered in Part 2 next week.
Sealing by companies
Notwithstanding any other provision in the 2014 Act or in the company's constitution, a document required to be executed under seal may be made up of several documents in like form. The Act allows a company seal and the necessary signature and/or countersignature to be executed on separate documents (counterparts) to that on which the seal is affixed. These counterparts will then be valid and effective as if they were executed as one document.
This provision may be helpful where the company seal and those signing the document are in different locations. However, in reality, most companies have already encountered this difficulty in recent months and overcome it by appointing powers of attorney or authorising persons other than directors to witness the seal.
One of the most significant features of the Act concerns changes to the law around general meetings. 'General meetings' in the context of the Act means annual general meetings (AGMs), extraordinary general meetings (EGMs), general meetings of shareholders and scheme meetings.
Notwithstanding any other provision of the 2014 Act or of the company’s constitution, the Act provides companies with a range of options in conducting general meetings during the interim period.
A company may postpone its AGM up to 31 December 2020 notwithstanding the statutory requirement to hold an AGM within 15 months of the last one. This consequently means that an AGM may be held more than 9 months later than a company's financial year end.
Companies needing to hold EGMs by a specific date may not avail of this option to postpone – it only applies to AGMs.
Companies authorised/regulated by the Central Bank of Ireland (such as investment companies) may not be able to avail of this provision either and should consult with the Central Bank on their obligations in this regard.
2. Hybrid or virtual
For the first time in Irish law, general meetings do not need to be held at a physical venue, but may be conducted "wholly or partly by the use of electronic communications technology". This means that a company may choose to hold either a virtual meeting (meeting with no physical location) or a hybrid meeting (physical meeting combined with electronic participation).
Each member or proxy who participates in a general meeting electronically shall be counted in the quorum for the meeting.
3. Cancellation or change
A general meeting may be cancelled, the venue changed, or the means of holding the meeting changed, at any time up to the end of the day prior to the day on which the meeting is to be held. The directors of the company may make such a decision where they deem it necessary in order to comply with Irish public health guidance or regulations in relation to the movement or gathering of people.
In "exceptional and unexpected circumstances", the directors may cancel a meeting at any time prior to the holding of that meeting.
General Meetings and Technology
There are a number of additional considerations that must be borne in mind by a company when choosing to use electronic communications technology for its general meeting. What is appropriate may depend on the nature and size of the company, the number of participants and budgetary constraints. How these provisions of the Act will work in practice remains to be assessed.
1.Real time, two-way communication
For the purposes of the Act, 'electronic communications technology' means technology that enables "real time transmission and real time, two-way audio-visual or audio communication enabling attendees as a whole with a reasonable opportunity to participate in the meeting".
The definition of 'electronic communications technology' suggests that each participant must, at a minimum, be able to hear and be heard during the meeting. How the requirement for real time, two-way communication can be satisfied in practice, particularly for meetings with a high volume of participants, remains to be seen. For example, it is unclear whether facilitating comments and questions via a chat box or other Q&A tool would be sufficient.
2.Access and security
The Act emphasises that access to the meeting may only be restricted to the extent required to ensure the identification of attendees and the security of communications. Attendees must be informed of any such restrictions or requirements before the meeting.
Any technology used by the company must, "as far as practicable", be secure, minimise the risk of data corruption and unauthorised access, and provide certainty as to the source of the communications.
3. Disruption or failure of technology
The Act states that any failure or disruption of the technology must be "remedied as soon as practicable" and shall not invalidate the meeting. However, it is unclear what degree of disruption will be acceptable for reliance on this provision. Where transmission of the meeting is significantly impacted, companies may come under pressure from shareholders to adjourn the meeting and reschedule it for another occasion.
Where the failure or disruption is a result of the equipment being used by an attendee, a company will not be liable for this (unless this is attributable to any "wilful act" of the company).
A company may (but is not obliged to) provide a "mechanism" for casting votes either before or during the meeting. However, any such mechanism must not necessitate physical presence by a member or a proxy at the meeting.
Where the chairperson decides to hold a vote on a resolution by a show of hands, s/he must be of the opinion that s/he can (i) identify the members entitled to vote and (ii) verify the content of the votes.
In addition to the usual statutory requirements for notice of general meetings, notices for electronic meetings during the interim period must include:
the electronic platform to be used for the meeting;
details for access to the platform;
the time and manner by which an attendee must confirm his/her intention to attend;
any requirements or restrictions that the company has put in place for identification of attendees;
the procedure for making comments and asking questions during the meeting; and
the procedure to be adopted for voting on resolutions.
The Act provides some much needed clarity and flexibility to Irish companies facing difficulties in complying with aspects of the 2014 Act. While the measures are set to expire on 31 December, it is possible that they will be extended into 2021 (depending on the level of threat to public health presented by COVID-19 at that time).
Beyond the pandemic, the Government has indicated that the Act is a "trial run" for permanent company law amendments in respect of electronic meetings and other governance requirements, so we will be following this area with interest.