Responsibility for the management and control of Irish companies is invariably placed in the hands of directors. Directors have a wide-ranging list of statutory duties and obligations derived from legislation and common law and are primarily responsible for managing and anticipating the risks which their companies face. Directors’ duties are owed, in the main, to their company as a whole but they are also required to have regard to the interests of members and employees (as well as creditors in certain circumstances).
Ordinarily, the day to day running of an Irish company requires a lot of human interaction – for example, to hold meetings, sign documents and meet corporate compliance and filing requirements. The Covid-19 pandemic has caused the worldwide corporate community to consider alternatives to physical meetings and signings and challenges have arisen in terms of adhering to corporate compliance requirements.
Covid-19 has also created risks for companies carrying on all types of businesses and so directors should consider, as a matter of good corporate governance, adopting policies and procedures to deal with those risks. Directors of Irish companies should consult and comply, on an ongoing basis, with all government and HSE guidelines on Covid-19. Depending on the risks which the pandemic presents for their companies, directors may consider that specific policies are required to deal with those risks. Formal policies should be reduced to writing, considered and approved by the directors and, if applicable, communicated to those employees or others to whom the policies relate.
Board Decisions
Directors usually take decisions at board meetings or by unanimous written resolution. During the current pandemic, it would be prudent for directors to hold meetings via distance communications or by way of written resolution.
Director Written Resolutions
Under the Irish Companies Act 2014, unless a company’s constitution provides otherwise, a resolution signed by all of the directors entitled to receive notice of a directors’ meeting, shall be as valid as if it had been passed at a directors’ meeting duly convened. The resolution must be unanimous and where directors cannot sign the same piece of paper, the written resolution can consist of several documents, each signed by one or more directors and will take effect from the date it was signed by the last director. Each director should sign an original and return their signed page to the company secretary (by email and post) to allow the company secretary to maintain up to date company registers.
The Companies Act 2014 also provides for majority resolutions of directors where one or more directors (but not the majority of the directors) is not permitted to vote on a resolution, for example, in the event of a conflict of interest.
Electronic Board Meetings
Under the Companies Act 2014, unless a company’s constitution provides otherwise, electronic participation at a directors’ meeting is possible – by means of telephonic, video or other electronic communication. It is important to check that virtual meetings are permitted under a company’s constitution. The directors must be able to speak to one another and be heard by the other participants. A director participating in this way shall be deemed to be present in person at the meeting, be entitled to vote and be counted in the quorum.
At each electronically held meeting, a decision should be reached as to the location of the meeting and, very importantly, it may be necessary to obtain advice from a company’s tax consultants in this regard. Some companies, for example, may be required to hold physical board meetings in Ireland with a majority of directors physically present in Ireland in order to demonstrate residency from a tax perspective.
Alternate Directors
An alternate director is someone who is appointed to act in place of an existing director who may not be able to attend a board meeting, for example due to illness. In order to be effective, the procedure regarding alternates set out in a company’s constitution (if any) or the Companies Act 2014 must be adhered to. Once appointed, a filing is required to be made in the Companies Registration Office (CRO) in respect of the alternate director who, while he/she holds office as an alternate director, must receive notice of board meetings, attend such meetings and, in place of the appointer, vote at such meetings.
The required filing (on a B10 form) must be completed online. It is worth pointing out here that, such an appointment will be effective from the date of the resolution to appoint (rather than from when any required filing is made in the CRO). The validity of the appointment of any alternate director will be unaffected by a delay in filing a B10 form at the CRO and the appointment is effective from the date on which the resolution approving the appointment is passed.
Committees
Depending on the nature of a company’s business and the size of the board of directors, directors may consider it appropriate to delegate some of their powers to a committee specifically to address risks posed by the Covid-19 pandemic. Board powers, for example, relating to organising and monitoring remote working arrangements, could be delegated to a committee.
Committees are established by resolution of the board and the directors can impose such regulations on the committee as they see fit. The committee may only act in accordance with the powers granted to it by the appointing resolution – the board retains responsibility for decisions and actions of any committee and can take back any delegated powers at any time. Any delegated authority should be monitored to ensure that it is being properly adhered to and that it works from the directors’ perspective.
Annual Returns, Financial Reporting and Companies Office Operations
Annual Returns
Due to the Covid-19 pandemic, the Registrar of Companies has decided that all annual returns due to be filed by any company between the start of the pandemic restrictions and 30 June 2020 will be deemed to have been filed on time if all elements of the annual return are completed and filed by 30 June 2020. This is to allow businesses and their financial advisors to focus on more immediate financial challenges. The date of 30 June 2020 may be extended by the CRO depending on the situation at that time.
All annual return signature pages due to be delivered to the CRO will be treated as received on time if they are received by the CRO by the close of business on 30 June 2020. Filings can still be made online, but processing of annual returns may now take longer than the usual timeframes. The CRO has advised that all filings received by the CRO will be queued and processed as soon as possible. Those who possess a Revenue Online Services (ROS) signature can complete the online filing using the ROS signature instead of using a signature page.
Strike off steps and procedures have been suspended until after 30 June 2020 and the CRO has confirmed that a company that does not file its annual return on time will not be struck off.
Financial Reporting
Irish companies will need to consider the impact of the pandemic on their financial statements and financial reporting obligations.
Under the Companies Act 2014, the directors’ report to be annexed to a company’s financial statements must contain, amongst other requirements, particulars of important events affecting the company which have occurred during the financial year. The Irish Companies Act 2014 also requires certain companies to include in their directors’ report a description of their principal risks and uncertainties. The extent of the risks and the degree to which they may crystallise will depend on a company’s particular circumstances and this may change as time moves on during the pandemic.
Directors will wish to consider and consult with their financial advisors as appropriate, as to whether the pandemic will have an impact on the performance of their company and consider any required financial statement disclosures.
Companies Office Operations
As at the date of writing, the CRO has a very helpful summary available on its website entitled ‘CRO-Update on Services Available’ dated 15 April 2020. The CRO public office remains closed but certain services are available.
For example, new company incorporations are being received by the CRO, processed and registered. Submissions for new charges and summary approval procedures are being received, processed and registered. Some delays might reasonably be anticipated in this regard.
CRO customers can still order documents from the CRO and online filing is still possible. The CRO is accepting delivery of post through An Post or the DX Exchange, however, it will not accept items delivered by courier or by hand.
Conclusion
The Covid-19 pandemic has and will continue to cause disruption for many Irish companies. As part of their role in managing the business of a company, directors of Irish companies should take steps to consider, anticipate and effectively deal with the risks which the pandemic has presented.
If you have any queries or concerns regarding the information in this note, please contact emmac@crowleymillar.com or neil@crowleymillar.com or your usual Crowley Millar contact.
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Emma Cafferky, Partner, Corporate Department (emmac@crowleymillar.com)
Written by Emma Cafferky, Partner
Dated 1 May 2020
Crowley Millar Solicitors LLP Disclaimer: This is a general information note and is intended for information only. It does not constitute legal advice and should not be regarded as a substitute for legal or other professional advices. Such advice should always be taken before acting on any of the matters referenced in this information note.