The Companies (Miscellaneous Provisions) (Covid-19) Bill 2020 has completed the first stage in Seanad Éireann. The new proposed legislation will be for an "interim period", ending on 31 December 2020, unless extended to 30 June 2021.
The Companies (Miscellaneous Provisions) (Covid-19) Bill 2020 (the "Bill") will:
- Increase the current debt thresholds for a winding up petition from an individual debt of €10,000 (or aggregate debts of €20,000) up to €50,000 for aggregate debts owed by a single creditor. This is to prevent companies being compulsorily wound up for relatively small debts.
- Enable the courts to extend the maximum period of examinership, in exceptional circumstances, from 100 to 150 days. The maximum period for an Examiner to report to the court and seek approval of a proposed scheme of arrangement will be increased to 150 days subject to permission from the court. This is a significant change and will allow much needed time for the Examiner and the company to negotiate with key stakeholders and potential investors and put together a viable rescue plan. An increased period of trading while protected from creditors will, however, result in an increased cashflow requirement and potential losses so we anticipate that the court will allow this sparingly and only if it is likely to lead to the survival of the company.
- Facilitate the virtual holding of creditors' meetings in voluntary and other liquidations, examinerships and statutory schemes of arrangement. This is a much needed provision which recognises the real difficulty in holding physical creditor meetings. The practice of holding such meetings remotely has been widespread during the Covid-19 period up to now and this provision removes any doubt about the legality of this practice.
- Provide that directors of insolvent companies must have regard to the interests of creditors of the company and preserve the company's property. This is an important provision which recognises that it may well be in the interests of the creditors not to rush to wind up the company and to take steps to preserve value by protecting key assets such as leases and, for example, continuing to trade for a period on a limited basis. This is intended to give some protection to directors from personal exposure in these circumstances.
- Enable documents under company seal to be executed in different counterparts.
- Give extra time for companies to hold AGMs, explicitly enable them to hold general meetings by electronic means "provided that all those entitled to attend have a reasonable opportunity to participate".
- Permit directors to withdraw a dividend resolution or to reduce the dividend proposed to be declared by resolution where the directors have recommended the declaration of a dividend at a general meeting of the company.
Eversheds Sutherland will provide a further update as the Bill progresses through the Houses of the Oireachtas and is enacted into law.
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