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COVID-19 and the Management of Companies

10 March 2020

The responsibility for the management of an Irish company sits with its directors, save to the extent the constitution of the company provides otherwise. The directors are responsible for, among other things, anticipating and managing the risks which their company may face. It is good corporate governance for directors to have their company adopt policies and procedures to deal with those risks.

The recent spread of COVID-19 is likely to create risks for companies carrying on all types of businesses, which the boards of directors of such companies should consider and address.

Financial reporting – risks

Companies should consider the impact of COVID-19 on their financial statements and financial reporting obligations. The Companies Act 2014 requires that the directors’ report to be annexed to a company’s financial statements contain, among other things, particulars of important events affecting the company which have occurred in the financial year and a description of the principal risks and uncertainties facing the company. 

Directors may wish to consider whether COVID-19 will have an impact on the performance of their company’s business to the extent that disclosure is necessary.

Regard to employees

The directors of a company should have regard to the interests of the company’s employees. Given the efforts to contain the spread of COVID-19, directors should consider whether employees need to travel, if they can safely and efficiently work from home, and even whether antibacterial soaps, tissues and hand sanitizers should be provided in the workplace. You can read our dedicated article on COVID-19 and employment here

Risk policy

In order to manage business risks effectively, it is advisable for directors of companies to draw up, adopt, publish and enforce policies and procedures. It would be common, for instance, for a company to have in place policies to deal with business risks associated with health & safety, data protection and bribery and corruption. Depending on the type and gravity of the risks which COVID-19 carries, directors may consider a policy dedicated to dealing with those risks.

Any policy that the board adopts should be drawn in writing, formally considered and adopted by the board by resolution, and communicated to all staff to whom it relates, with training provided where necessary. Any persons to whom authority is delegated by the board under a policy should be made aware of their powers and the limits on those powers.

COVID-19 committee

Should they consider it necessary, the directors of a company may delegate some of their powers to a committee specifically in order to address risks caused by the spread of COVID-19. Whether this is relevant will depend on factors such as the nature of the company’s business, the likelihood of an outbreak, and the size of the board of directors. Board powers such as dealing with travel bans, co-ordinating hygiene supplies, organising remote working arrangements or closures of the business may be delegated to the committee.

Committees are established by resolution of the directors, usually at a meeting. This is explained in further detail below.  

The ultimate responsibility for the obligations of the board of directors will remain with the board, and not the committee. The directors must ensure that any such authority being delegated is clearly described, documented and approved by the board.  The delegated authority should also be reviewed on an on-going basis to make sure that the authority is being properly followed and still works from the board’s perspective.  

Business Continuity and Board Meetings

The frequency of board meetings will depend on the nature of a company’s business. For good corporate governance, it is recommended that directors meet at least once every quarter to discuss the business of the company. In addition, boards are required to meet as necessary, for instance to authorise the use by the company of its seal, or in other circumstances.

Directors generally take decisions at meetings or by unanimous written resolutions. Meetings can be held via video, telephone, or other electronic means. All participants must be able to hear and speak to each other throughout the duration of the meeting. A director taking part in such a meeting shall be entitled to vote, and will be counted in the quorum. It is important to check the constitution of the company to ensure that virtual meetings are permitted.

It would therefore seem prudent in the circumstances for board to hold their meetings via distance communications or by way of written resolution, especially where directors may live in COVID-19 hotspots such as northern Italy or mainland China. However, it should be noted that certain companies may be required to hold physical board meetings in Ireland with the majority of directors physically present in the State to provide evidence that the central management and control of the company and any major strategic board decisions are made in Ireland in order to demonstrate residency for tax purposes.

The location of meetings and use of written resolutions should be confirmed with the company’s tax advisors. 

Conclusion

Directors of Irish companies should, as part of their role in managing the business of those companies, take steps to consider, anticipate and deal with the new risks which COVID-19 bring.

If you would like assistance or advice in managing risks associated with COVID-19 from a board of directors’ perspective, including any of the matters raised in this article, please contact a member of our Corporate Governance & Compliance team. 


The content of this article is provided for information purposes only and does not constitute legal or other advice.

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