The Companies (Miscellaneous Provisions) (Covid-19) Act 2020 (the Act) was enacted on 31 July 2020. The Act provides for some amendments to the insolvency regime, in addition to amendments to the Companies Act 2014 (the 2014 Act) to specifically provide for virtual general meetings and permitting the execution of documents under seal using counterparts.
Key Points
- Amendments apply until 31 December 2020, which can be extended (interim period)
- Creditors' meetings can be held remotely
- Possible extension of time from 100 to 150 days for examinership protection
- creditor's statutory demand leading to liquidation increased to sums over €50,000
Creditors' Meetings
The Act proposes amendments to the 2014 Act to allow all meetings of creditors and contributories during the interim period to be wholly or partly by electronic communications. The Act includes rules around the convening, conduct of and notices of such meetings. These proposals are the same as the proposed amendments to the holding of general meetings of companies, details of which are set out in our article here.
Extension of Examinership period
The court may provide a company and the examiner with an additional 50 days within which to present restructuring plans where he or she is unable to report within the 100 days currently allowed. In order to be granted additional time under this section the examiner must demonstrate to the court that there are exceptional circumstances, although the Act does not specifically require that those exceptional circumstances be related to the pandemic.
Circumstances where a company is deemed to be unable to pay its debts
Section 570 of the 2014 Act sets out the circumstances where a creditor can seek to put a company into liquidation if it is unable to pay its debts. The Act amends section 570 to provide that during the interim period a company will be deemed to be unable to pay its debts if the company is indebted to one or more creditors in a sum exceeding €50,000 and has failed to pay the sum due within 21 days of a written demand. Ordinarily the amounts concerned are €10,000 in respect of a single creditor and €20,000 in the aggregate.
Missed opportunity?
Whilst the amendments proposed by the Act are welcome, it may be a missed opportunity to make more changes to help businesses in difficulty, similar to the changes made by the UK Corporate Insolvency and Governance Act 2020 (the UK Act) enacted in June 2020.
Initially it was intended that the new legislation would put the director's duty to have regard to the interests of a company's creditors and to preserve the company's property on a statutory footing, but this has not made it into the Act. Unlike the UK Act, the Act does not include any protection for directors from personal liability for a company’s debts because they continued to trade during the Covid-19 restrictions. The UK Act includes a temporary provision restricting creditors from issuing winding-up proceedings, unless they can show that the company's insolvency was not due to Covid-19. The UK Act has also introduced a restriction in certain circumstances on suppliers of goods or services from terminating a contract because the customer has entered a restructuring or insolvency process.
"Note the provisions of the Act will not commence until a Ministerial Commencement Order is signed."
For more information or to discuss any COVID-19 related issues impacting your business, please get in touch with Barry Cahir (Litigation and Insolvency), Thomas O'Dwyer & Sharon Delaney (Litigation), Sandra Masterson Power & Paul Gough (Employment), Aidan Marsh & Gerry Gallen (Commercial Property), Máire Cunningham & Damian Maloney (Corporate and Commercial),Dorit McCann (EU, Competition & Procurement) or your usual Beauchamps contact.
