The Companies (Miscellaneous Provisions) (Covid-19) Act 2020 (the Act), was signed into law on August 1st 2020 and is due to be in place until 31st December 2020 (the interim period).
We looked at the general amendments to the act a few months back. Below, we’ve listed the insolvency and cashflow-specific provisions in the Act, and the implications of these for companies and company directors in the current economic climate.
During the interim period, directors can withdraw or amend a dividend resolution previously passed in a general meeting if they deem it necessary due to actual or perceived financial consequences of the pandemic. This power, however, can only be exercised with unanimous written shareholder consent.
The move allows directors an opportunity to keep some or all dividends within the company, this may aid companies who are suffering from cash flow problems.
As with general meetings, creditors meetings may now be convened either wholly or partly online provided sufficient notice and opportunity is afforded to those entitled to attend. You can see a detailed outline of the regulations for virtual or partially virtual meetings in our previous piece on the Act here. If you are convening a creditors meeting (virtual or otherwise), you should take legal advice to ensure the statutory requirements are correctly followed.
The period of protection which is afforded to companies in Examinership may now be extended from 100 days to 150 days. This extension will come on foot of a court application is not to be viewed as a standard entitlement.
Winding up thresholds
Under the Companies Act 2014, a company may be wound up by the High Court if it is unable to pay its debts as they fall due. Under that Act, if a creditor wished to petition the High Court to wind up a company, the creditor needed to be owed at least €10,000. Two or more creditors could petition together where they were owed a total debt of at least €20,000. The new provisions under the 2020 Act have increased this threshold for one or more creditors to €50,000. This will offer struggling companies a greater cushion before being threatened with winding up proceedings.
At present, the above amendments are in place until the 31st December 2020. This interim period may well be extended into 2021. You can review the Act in full here.
For more information on this bill, or any other insolvency-related queries, please contact Dermot McClean, Solicitor in Commercial Litigation and Insolvency, at [email protected] or call 01 644 5800.