Company Law considerations during COVID-19
Over the past couple of weeks, we have all been adopting to a new way of life imposed on us by the impacts of COVID-19 in particular a lack of human interaction, travel restrictions and the prohibition of gatherings which all makes running a business quite difficult and we hope that you and yours are all keeping safe and well during these challenging times. While we are still adjusting to an ever-evolving environment one thing is for sure, we now need to focus on adopting our ways significantly for the long term. The value placed on compliance and governance will always be challenged during a time of crisis however now more than ever companies should be considering contingency plans in light of global pandemic and in this regard we set out below some key updates and considerations from a company law perspective.
Companies Registration Office
The Registrar of Companies has announced that all annual returns due to be filed by any company during the pandemic will automatically be granted an extension, to submit their returns no later than the 30th June 2020 to allow businesses to focus on the more immediate challenges.
While the CRO had closed their offices in light of Government guidance, they are now back operating at a reduced capacity and accepting post via their Dublin and Carlow offices, their offices are still closed to the public until further notice and delays in processing submissions are to be anticipated. This extension may be subject to change depending on the situation closer to time.
Companies should review their annual return dates in line with their financial year end to ensure they have the maximum amount of time available to prepare and file their returns with the CRO. An annual return date cannot be more than 9 months after your financial year end and in this regard should your annual return date fall shy of the full 9 month period permittable by law you may need to apply for an extension to accommodate your current situation.
Companies may need to consider the impact on their business should any of the board members become ill or unable to attend to the company’s affairs for other reasons during this time of crisis. The Companies Act 2014, the ‘Act’, permits the appointment of an alternate director to act in his or her place subject to the approval of a majority of the board of directors. The appointee, while he or she holds office is entitled to notice of director meetings, to attend and to vote at such meetings as a director in place of the appointer and the appointment is to be notified to the Registrar of Companies.
Sole Director and Sole Member Companies
Private companies that have a single director may now need to consider the possibility of appointing one or more additional directors to the board. The appointment of additional directors is effective from when the resolution is passed and in this regard the validity of the appointment will not be effected by a delay in filing the statutory notification with the CRO. Similarly, companies that have a single member may also need to consider putting in place mechanisms for the transmission of their shares in the event of a serious illness or death. The constitution of the company may provide for the process around the transmission of shares and the appointment of additional directors however if not done so already, the constitution should be reviewed and updated to accommodate possible future decisions within the company.
Under current circumstances, it may be very difficult to hold meetings of the board and in the interest of safety there are other options that may be more suitable at present. The Act provides that a board meeting may consist of a conference by means of telephonic, video or other electronic communications and that each director attending will be deemed present in person at the meeting, shall be counted in the quorum and shall be entitled to vote.
Should a meeting be held by way of electronic means, it is a requirement that each director be able to speak to and be heard by the meeting. Such a meeting is deemed to take place where the largest group of those participating is assembled, if there is no such group, where the chairperson of the meeting then is or if neither of these scenarios apply, in such location as the meeting itself decides. The location of the meeting may have possible tax implications and the board should have regard to possible repercussions for the company when planning a meeting.
This provision of the Act is an optional provision and applies unless the constitution of the company has dis-applied it. Companies will have to source suitable technological means to facilitate remote meetings however with the majority of people working from home, remote meetings should be relatively straight forward to set up.
The Act also provides that resolutions of the board can be passed by way of written resolutions and that written resolutions are as valid as if the resolutions had been passed at a meeting duly convened and held. For a written resolution to be valid, all the directors must sign the written resolution whereas at a physical meeting a resolution is passed by a simple majority. A written resolution can be signed in counterparts and the resolution will take effect from when it is signed by the last director. Again this provision of the Act is an optional one, the constitution of the company will need to be checked to ensure that written resolutions are not dis-applied in any way.
As AGM season is fast approaching, companies need to implement contingency plans in light of the spread of COVID-19, this is particularly important where the board of directors and shareholders are internationally based. Single member companies or private companies limited by shares may be in a position to dispense with the holding of their AGM where all members entitled to attend and vote at general meetings before the latest date for holding that meeting, sign a written resolution approving all such business of the relevant AGM. The resolutions are deemed to be passed on the date the last member signs.
In the absence of the option to dispense with your AGM, another option is a Hybrid general meeting which is essentially a physical meeting that facilitates members to participate by electronic means. The Act provides that a general meeting may be held in 2 or more venues (whether inside or outside the State) at the same time using any technology that provides members, as a whole, with a reasonable opportunity to participate. Appropriate technology should be sourced and clear instructions on how to participate should be included in the notice of the meeting.
For companies that cannot dispense with their AGM’s or hold their AGM’s by way of technological means, companies may need to consult their constitutional documents to consider whether delaying, postponing or adjourning the AGM are short term options. It is anticipated that government intervention will prohibit such an event for the near future at the least however communication is key at a time of crisis and companies need to keep their shareholders informed and up to date on measures to reduce the spread of COVID-19.
As the business of the AGM includes the declaration of a final dividend, delaying, postponing or adjourning the AGM may result in the company’s final dividend not being paid by the expected date. Should the timing of the dividend be vital, the company may need to consider the payment of an interim dividend however in such a situation it is always advisable to consult your tax advisors in advance of such a decision being made.
Summary Approval Procedures
A copy of the declaration made by the directors for the purpose of the restricted activity together with the statutory notification must be submitted to the CRO within 21 days after the date on which the restricted activity is commenced, failure to do so will invalidate the process. While the CRO remain closed, they have introduced an interim process to allow for the submission of Summary Approval Procedures to a dedicated email address and that this will constitute compliance with the Act.
Voluntary Strike Off
The CRO have confirmed that all strike off steps and procedures have been suspended until after the 30th June 2020.
Any company that may be affected by the COVID-19, can apply for a three month extension however please note that the application has to be made in advance of the filing deadline and any company that has already extended their filing deadline, or shortened their accounting reference period, may not be eligible for an extension. In cases where a company is considered late at present, the Registrar will consider appeals based upon COVID-19 circumstances such as ill health however such appeals will be treated on a case by case basis and at the full discretion of the Registrar.
Get in Touch
If you are encountering any of the topics discussed above or have any queries at all please do not hesitate to contact us.