I move: "That the Bill be now a Second Time."
I am pleased, as Minister of State with responsibility for trade promotion, digital and company regulation, to present the Companies (Miscellaneous Provisions) (Covid-19) Bill 2020 for the consideration of the House following its successful passage through the Seanad. The Bill will provide for the first phase of measures intended to mitigate the impact Covid-19 has had on the normal operation of business in Ireland.
Before proceeding with a summary of the detailed provisions, I would first like to offer some background and context to the Bill. As Deputies may be aware, a number of issues in the area of company law have come to the fore in light of the pandemic. From the onset of Covid-19, business closures my Department received a significant number of representations, including proposed amendments to the Companies Act intended to support companies as they respond to both the operational and economic challenges of the crisis. Similar issues have arisen with regard to industrial and provident societies, which are mostly co-operatives. Real, practical issues were raised in respect of the ability to hold annual general meetings, AGMs, in light of the public health guidelines on social distancing. AGMs are an important forum for members to approve the accounts, appoint auditors and hold the directors accountable for the affairs of the companies and co-operatives. In addition, general meetings need to be held if a company or co-operative is commencing a range of activities, for example, a merger or members' voluntary winding-up. The issue of AGMs has already been the subject of litigation. A company recently found itself before the court where a shareholder brought proceedings to challenge the intention to hold an AGM with restricted access.
Concerns were also raised with regard business solvency. In terms of these concerns, I am sure the Deputies will have had the experience in their constituencies of businesses which were thriving and full of customers only a short time are now struggling to balance the books and keep money in their tills. Given that there are approximately 240,000 companies and 950 industrial and provident societies registered in Ireland, even if only a percentage encounter such difficulties, that provides clear evidence that a change is needed to ensure they can continue to comply with their obligations under the legislation and measures to alleviate the strain on their finances are required.
My Department, in conjunction with the company law review group, CLRG, a statutory advisory body charged with advising the Minister for Business, Enterprise and Innovation on company law, has worked to find practical solutions to these issues as a matter of urgency.
Efforts were focused on matters which could be concluded within a short timeframe and, as such, this Bill deals only with those items which were required immediately and capable of being progressed quickly. Extensive consultation took place with the CLRG, the membership of which is broad and represents key stakeholders in this area such as the Irish SME Association, IBEC, the Irish Congress of Trade Unions, the Office of the Director of Corporate Enforcement, the Revenue Commissioners, insolvency practitioners, legal practitioners, academics and the Department. The group is uniquely well positioned to give a balanced view on the need for this legislation. In addition, my Department has consulted the Irish Co-operative Organisation Society, which is one of the co-operative umbrella organisations.
I will now turn to the provisions of the Bill. The main provisions can be broadly summarised as follows: to provide that the measures will be operative for an interim period up until 31 December 2020, with potential for extension; regulation-making power in respect of extending the interim period and amending the operational detail of virtual meetings; general meetings for companies and for industrial and provident societies, which are mainly co-operatives, may be held virtually; creditors' meetings may be held virtually; documents which are required to be executed under seal may now be executed in counterpart; increase the amount at which a statutory demand can be issued from €10,000 singularly or €20,000 aggregate to €50,000; and extension of the examinership process to a total of 150 days in exceptional circumstances and subject to court approval.
Part 1 deals with preliminary and general provisions. It contains standard provisions, such as those relating to the Short Title and commencement.
Sections 3 and 4 deal with the interim period. The interim period refers to the limited period during which the provisions of the Bill will be operational. This timeframe can be extended by Government order and different provisions may be extended by different times. The latter is important because it gives us the flexibility to respond to the changing nature of the crisis and its effect on companies.
Section 5 makes a small but practical amendment to the Companies Act in the context of the sealing of documents. Under the Companies Act, there are a number of documents which must be executed under seal. This means they must have the company’s official seal affixed to the document and the document must be signed by the company director and secretary. As more and more people are working from home this has created situations where the signatories and seal are in separate locations. Now, documents may be signed and sealed on separate pages which will be counted as one single document for the purpose of the Act. This will reduce the administrative burden on companies.
Sections 6 to 11 make provision for general meetings, including AGMs, to be held wholly by electronic means during the interim period. Such meetings may now be held by electronic means using online platforms such as Zoom or Webex or allowing people to dial in. Companies must guarantee the security of the platform used for the meeting as far as is reasonably possible. Provision is made for the details which must be included in the notice of a general meeting held by electronic means. Such notice must include details of how an attendee can access the platform used for the meeting, as well as any measures put in place by the company for security purposes. For example, some companies may provide attendees with personal identification numbers which they must enter to access the meeting. Further consequential amendments are made to the Companies Act to ensure those who participate in electronic meetings will be counted as part of the quorum.
Companies will be afforded flexibility to reschedule meetings should this be deemed necessary by the directors in order to comply with public health advice from the Government. There may be smaller companies which can hold physical meetings and comply with social distancing guidelines. This provision is designed with them in mind should they schedule such a meeting and subsequently, further restrictions are announced.
New provision is made for the withdrawal or amendment of dividend resolutions. Where a company has previously proposed to pay a dividend to shareholders but the impact of Covid-19 on the company’s finances makes this untenable, directors may withdraw or amend the dividend resolution. This will ensure that directors are empowered to make decisions for the long-term financial stability of the company.
Finally, provision is also made for AGMs to be deferred until 31 December 2020. This is in line with measures taken at EU level as per Article 2 of Council Regulation 2020/699 on temporary measures concerning the general meetings of European Companies and of European Co-operative Societies adopted on 25 May 2020.
Section 12 and 13 amend section 520 and 534 of the Companies Act and provide for an increase of 50 days to examinership, bringing the total period to 150 days. This is an important amendment intended to give companies additional breathing space to restructure, trade through the crisis and preserve employment.
Section 15 amends section 570 of the Companies Act, which sets out the circumstances in which a company is deemed unable to pay its debts. Normally, a company is deemed unable to pay its debts when it has failed to pay debts of €10,000 in respect of a single creditor or €20,000 in the aggregate within 21 days of a statutory demand being delivered. It is at this point the company may be wound up by the Court. Section 15 increases the threshold at which a company is deemed unable to pay its debts to €50,000 for one or more creditors. This amendment is intended to prevent companies which were previously viable from being would up for relatively low levels of debt.
Sections 15 to 24, inclusive, deal with creditors' meetings under the Companies Act. Parts 9, 10 and 11 of the that Act provide for several circumstances in which these meetings must occur.
For example, examiners and liquidators are appointed to call meetings of creditors at various stages in the respective processes. This Bill will allow such meetings to take place by electronic means for the duration of the interim period in line with what is provided in respect of general meetings. There are a number of consequential amendments made to sections which specifically reference creditors' meetings to include a reference to creditors' meetings held by means of electronic communications.
Section 25 makes an amendment to section 1103 of the Companies Act, which provides for additional notice provisions required for general meetings of publicly-traded companies. It includes additional information which must be provided should that meeting be held by electronic communications such as access details for the electronic platform.
Section 26 makes a minor amendment to section 1106 of the Companies Act by replacing the words "provide for" with the word "guarantee" at section 4(a)(i).