New Flexibilities for Irish Corporates

Introduction

In response to the logistical, compliance and financial challenges facing Irish companies during the COVID-19 pandemic, the Companies (Miscellaneous Provisions) (COVID-19) Act 2020 (2020 Act) was enacted by the Dáil on 30 July 2020.

The 2020 Act makes a number of important temporary amendments to the Companies Act 2014 (Companies Act) and will remain in effect from its commencement until 31 December 2020 (Interim Period), and this may be extended to 30 June 2021, if required.

The key flexibilities introduced by the 2020 Act include:

• the ability to postpone Annual General Meetings (AGM) to 31 December 2020;

• the ability to hold AGMs and creditors' meetings virtually;

• the ability to revise of the issue of dividends.

• the ability for documents which are to be executed under seal to be executed in counterpart;

• an increase in the threshold before a creditor can issue a statutory demand; and

• the ability to extend the examinership process to up to 150 days.

Postponement of AGMs

Irish companies are required to hold an AGM every year with a maximum period of 15 months between AGMs. Newly incorporated Irish companies must hold their first AGM within 18 months.

The 2020 Act amends this requirement and allows a company to hold its AGM on any date during the Interim Period. This is regardless of the timelines set out in the Companies Act or in the company's constitution.

Virtual Meetings

Whilst the Companies Act allowed shareholders to participate in general meetings virtually or via hybrid form, it was still required that the meeting have a physical location. The 2020 Act amends this requirement and permits shareholder meetings to be held virtually (either wholly or partially) during the Interim Period.

Issue of Dividends

Irish companies may have announced provisional dividends prior to the impact of the COVID-19 pandemic becoming known. Directors may now be of the view that due to the actual or perceived effects of the COVID-19 pandemic the payment of a dividend should be cancelled or reduced. The 2020 Act gives director's the ability to:

1. withdraw the resolution to approve a dividend; or

2. propose the amendment of that resolution to reduce the amount of the dividend.

However, the above options may only be exercised if:

1. all the members of the company agree in writing to the withdrawal or amendment of the dividend; and

2. notice of the director's opinion and consequent proposed withdrawal or amendment of the resolution is given no later than 3 days before the general meeting.

Execution of Documents Under Seal

The Companies Act provides that any document to which the common seal is affixed must be signed by a director of the company and either the company secretary or a second director. The 2020 Act provides that such documents may be signed in counterpart and may consist of several copies with one copy of the document signed by a director, one copy of the document signed by another director or company secretary and one copy of the document having the company's seal affixed to it.

Court Winding Up

A further significant change imposed by the 2020 Act is the minimum debt threshold at which a company is deemed unable to pay its debts. Whereas the Companies Act sets this level as €10,000 (or €20,000 in the case of two or more creditors acting together) before a creditor can issue a statutory demand, the 2020 Act increases this amount to €50,000 during the Interim Period.

This increase affords Irish businesses facing cash-flow difficulties a better chance of remaining solvent during the Interim Period and should reduce the volume of debt actions coming before the Irish courts during this time.

Extension of Examinership Period

The Companies Act currently prescribes a period of 70 days (and a 30-day extension if required) in which an examiner must provide the court with its report.

During the Interim Period, the 2020 Act allows application to be made to the court for a further extension of up to 50 days where there are "exceptional circumstances." This potentially affords the examiner a period of 150 days to arrange for a corporate rescue.

Conclusion

The 2020 Act provides welcome flexibility to address a variety of challenges facing Irish companies during the COVID-19 pandemic. Given the evolving public health and economic situations, the 2020 Act will likely be dynamic in nature and can be expected to be further amended and extended as necessary.