The Department of Business, Enterprise and Innovation has published the general scheme of proposed legislation amending the Companies Act 2014. The Companies and Industrial and Provident Societies (COVID-19) (Amendment) Bill 2020 (the Bill) proposes to introduce temporary measures aimed at mitigating the impact of the COVID-19 pandemic on certain operational matters, such as by introducing an option to postpone an AGM to the end of the year or to hold it electronically. It also raises the debt bar at which a creditor can issue a statutory demand to €50,000.
This high-level briefing note is intended to provide you with a short summary of these proposed temporary measures which might assist businesses in identifying how the proposed amendments to the Act might assist them during this challenging period.
When will this legislation come into force?
At the time of writing, the full text of the Bill has not yet been published and it will need to go through the usual Oireachtas legislative process. Government has approved "priority drafting", but it may still be some weeks before the legislation is in force.
Most of the provisions will apply for an "interim period", expiring on 31 December 2020. This period may be extended by the Minister on multiple occasions up to 30 June 2021, where there are "any legal or practical restrictions in the State on travel or meetings arising from the prevalence or threat of Covid-19".
Will the legislation apply retrospectively?
It is not yet known if provisions of this Bill will be given retrospective effect. In the UK, the Corporate Insolvency and Governance Act 2020 came into force on 25 June, but certain provisions (including those on general meetings) applied retrospectively from 26 March.
Key features of the Bill:
1. Sealing by companies during the interim period
With officers of the company in various locations, a provision will be introduced to allow documents under seal to be executed separately and then treated as constituting one and the same instrument.
2. General Meetings (AGMs and EGMs)
The Bill proposes a number of temporary amendments to the Companies Act on holding and conducting general meetings, irrespective of anything to the contrary in a company's constitution.
Extension of time for holding AGM: A company may postpone its AGM until 31 December 2020.
Electronic/virtual general meetings: General meetings need not be held at a physical venue and may be fully conducted by electronic/virtual means, "provided all those entitled to attend have a reasonable opportunity to participate".
Change of location and date of general meetings: The date, location and/or means of holding an AGM may be changed at any time up to five business days prior to the scheduled time.
Dividend resolutions: Directors may withdraw a resolution to approve a dividend or put an amended resolution to the meeting to approve a dividend less than that originally proposed.
3. Circumstances in which company deemed to be unable to pay its debts
The debt threshold for the commencement of a winding up by the Court will be extended for an interim period, from €10,000 to €50,000 for an individual debt and from €20,000 to €50,000 for aggregate debts.
4. Creditors’ meetings may be conducted by fully electronic means
These provisions mirror those proposed for general meetings during the interim period. However, some specific measures regarding documentation and identification of creditors, and on providing access details where notices must be advertised in newspapers, will need to be addressed in separate regulations to be published by the Minister after this Bill becomes law.
5. Power of the court to extend the period in which an examiner can present a report to the court
This temporary provision will allow an examiner to apply to the court to extend the period in which s/he must make a report to the court. Currently an examiner has up to 70 days to present a report to the court, with a possibility of extension by 30 days on application to the court.
The Bill provides for the possibility of a further extension of 50 days in "exceptional circumstances". These exceptional circumstances "may concern, but shall not be limited to, procedures to implement the provision of new finance to the company and adverse effects of Covid-19". Accordingly, the period of an examinership may, in exceptional circumstances, last up to 150 days during the prescribed interim period.
6. Directors of insolvent company to have regard to interests of creditors
It is proposed to insert a new section into the Companies Act which codifies a director’s duty to creditors as the company approaches insolvency – this will not be a temporary provision. The duty already exists at common law and its placement on a statutory footing was recommended by the Company Law Review Group in its Report on the Protection of Employees and Unsecured Creditors.
7. Amendment of Industrial and Provident Societies Act 1893
In a similar manner to those amendments proposed to general meetings of corporate entities, the Bill proposes to amend the Industrial and Provident Societies Act 1893 in order to allow societies to postpone, relocate, and/or hold their AGMs by fully electronic/virtual means during the interim period.
The General Scheme of the Bill is accompanied by three draft statutory instruments, which set out in further detail how the temporary measures relating to general and creditors' meetings will be effected.
In particular, the Companies Act 2014 (General Meetings) Regulations 2020 provide welcome clarity to companies wishing to hold their AGMs by electronic/virtual means.
Among the provisions of the Regulations are the requirements to enable real time transmission of the meeting and to provide attendees with a "reasonable opportunity to participate" (such as by audio or audio-visual means).
While these legislative measures have been drafted in response to the pandemic and are intended to be temporary, they give some indication of how legislation to allow for electronic/virtual general meetings may be executed in the future.