Part 1 - New Company Law Measures
The purpose of the Companies (Miscellaneous Provisions) (COVID-19) Act 2020 (the “Act”) is to assist companies to deal with the challenges presented by the Pandemic. The Act was commenced by the Minister for Business, Enterprise and Innovation on 21 August 2020 and the changes are effective up to 31 December 2020, with the possibility of this being extended up to 30 June 2021. The measures introduced under the Act are aimed at easing the operational and financial burden on companies in complying with certain provisions in the existing companies’ legislation. We look at some of the practical solutions introduced by the Act which address issues that have arisen for companies in the energy sector in Ireland in recent times.
Execution of Documents
Documents which require a company seal can now consist of two or more pieces of paper and the seal and the relevant signatures may be on separate pages. This means that the signatories will no longer be required to attend the same location in order for the seal to be affixed. This is a welcome provision to facilitate the completion of a project.
The obligation on Irish companies to hold an AGM each year and no longer than 15 months apart, has presented a challenge for many companies due to the impact of the Pandemic and the public health guidelines. The provisions of the Act were, therefore, welcomed by companies with some of the noteworthy provisions being as follows:
- a general extension to the time limit for holding AGMs, which can be held up until 31 December 2020
- that companies can now hold virtual general meetings for the first time
- that a director may now amend a notice already issued for an AGM at any time prior to the meeting by giving a further notice which can allow for the meeting to be held virtually
The Act provides that where Directors have recommended the payment of a dividend and convened a general meeting and they subsequently form the opinion that due to the actual or perceived consequences of the Pandemic on the affairs of the company the dividend should be cancelled or reduced they can then accordingly withdraw or amend the resolution to approve the dividend.
Part 2 - Corporate Simplification
Now is also a good time for companies to look at ways in which to reduce costs and improve business efficiency. Many companies in the energy sector acquire or develop projects using holding company / project company structures and often incorporate various special purpose vehicles to ring fence costs and potential liabilities – an example is the affiliated supply company deployed as part of a “supplier lite” structure on a renewable energy project. Over time some of these companies may become dormant or their assets and activities are taken over by another entity within the group – or, in the case of a “supplier lite” structure, the power purchase role might be migrated from the affiliate to an external entity. Such models can also create unnecessary complexity where assets are being cross-collateralised through financing arrangements. By streamlining your corporate structure and removing dormant or unnecessary companies, your organisation can begin to enjoy a number of benefits which include the following:
Cost saving is a key benefit of corporate simplification. In our experience, an Irish dormant company or relatively inactive company can cost in excess of €8,000 a year to maintain when the fees and expenses required to meet its ongoing compliance requirements are taken into account, as well as audit and other legal obligations. Business efficiency can also be achieved in terms of freeing up management time from monitoring such companies.
Governance and Transparency
Improved transparency through a simplified structure is likely to be welcomed by finance providers and other stakeholders. It’s an ongoing challenge for companies to meet the ever-changing legal and corporate governance requirements including health and safety laws, anti-bribery and data protection laws. It is far easier to meet the required standards with a less complex corporate structure.
A complicated structure may lead to tax inefficiencies such as tax leakage or additional tax compliance burdens when repatriating cash up through the group. Simplifying the complexity of your corporate structure may resolve such tax inefficiencies within the business and allow for improved tax planning.
The Pandemic has resulted in many challenges for businesses. It is important that you are aware of the measures that can be availed of, and processes that can be implemented, in order to sustain your business throughout this period of uncertainty. The measures introduced by the Act should provide some respite for companies for the remainder of 2020 in terms of governance requirements. It remains to be seen whether the interim period will be extended beyond 31 December 2020 or whether further measures will be added by the Minister. In addition, the sooner that corporate simplification steps can be taken by a business, the sooner that business can enjoy the benefits and can focus on the core companies within the group.
If you have any questions regarding the changes introduced by the Act or if you would like to discuss your current corporate structure, please contact a member of our Corporate or Corporate Governance & Compliance teams.
The content of this article is provided for information purposes only and does not constitute legal or other advice.