Global menu

Our global pages

Close

Coronavirus – Corporate law update: How to move forward with business in light of Covid-19 – Ireland

  • Ireland

    18-03-2020

    With the growing spread of COVID-19, restrictions have been put in place which have made it difficult to conduct business as usual. The majority of businesses have faced disruption in one way or another, to include limiting of face-to-face interactions and employees and management being required to work from home. 

    However, despite, and often because of, the impact of COVID-19, businesses need to continue to enter into agreements and make decisions in the altered corporate and commercial landscape.

    This article intends to focus on how businesses can continue to enter into agreements and make decisions remotely without necessarily meeting face-to-face.

    1. Remote Execution of Documents

    Instead of physical signing and execution of agreements and other documents, electronic signings may be a solution to allow businesses to execute documents remotely in a quick and effective manner.  

    Since 1 July 2016, the EU Electronic Identification and Trust Services for Electronic Transactions in the Internal Market Regulation of 2014 (the “eIDAS”) has provided a common framework for the recognition of e-signatures across the European Union. The main Irish legislation on the validity and enforceability of e-signatures is the Electronic Commerce Act 2000 (the “e-Commerce Act”) which goes hand in hand with the eIDAS. 

    The e-Commerce Act facilitates electronic signatures in Ireland provided compliance is made with the formalities outlined in the legislation. Some of the key aspects of the regime are:

    • an electronic contract will not be denied legal effect, validity or enforceability solely because it is wholly or partly in electronic form;
    • documents signed by electronic signature are generally admissible in legal proceedings;
    • all parties to a document must consent to accept signatures electronically (such consent may be implied or inferred); and
    • documents where signatures are required to be witnessed or executed under seal will require additional formalities and security under the e-Commerce Act.

    Electronic execution of documents is becoming more commonplace these days and many businesses will be very familiar with the speed and efficiency of electronic execution, for example through platforms such as DocuSign.   

    However, while the e-Commerce Act will provide an alternative to physical signing/execution in many cases, there are some limits and exceptions on the documents that can be created, executed or amended electronically (eg documents dealing with interests in real estate and documents relating to trusts).

    In addition, the entry into deeds electronically causes particular logistical issues from an Irish corporate perspective (given this will generally require physically affixing a company seal). However, there are possible solutions such as execution by way of power of attorney and/or strict compliance with the rules on virtual signings laid out in the UK case of R (Mercury Tax Group and Another) v HMRC and the Law Society of Ireland guidelines.

    Irrespective of whether electronic or physical execution applies, appropriate corporate authority for the entry into the relevant document will still be required which feeds into the next point.

    2. Remote Decision Making

    The current restrictions on travel and meeting do not necessarily prevent company decision making processes from being effectively and validly concluded remotely.

    In the case of companies established under the Companies Act 2014 (the “2014 Act”), the following procedures may facilitate remote decision making (subject to any contrary or amending provisions in the relevant entity’s constitutional documents which would need to be reviewed and compliance generally with constitutional provisions in respect of quorum and conflicts etc.):

    a. Tele-Conference

    Under the 2014 Act, directors’ (or committee) meetings may consist of a conference between some or all of the directors who are not all in one place but each of whom is able to speak to and be heard by each of the other directors (directly or by means of telephonic, video or other electronic communication). The 2014 Act deems that the location of such a  meeting (which may have relevance from a tax perspective) to be (i) where the largest group of participants is assembled; or (ii) where no such group is assembled, the location of the chairperson; or (iii) wherever the meeting decides if (i) and (ii) don’t apply.

    b. Directors’ Written Resolutions

    Additionally, instead of holding a board (or committee) meeting, a resolution that has been validly signed by all the directors who are entitled to receive notice of a meeting of directors will be as valid as if it had been passed at a directors’ meeting duly convened and held.

    Directors’ decisions made using the written resolution procedure must be unanimous so that all eligible directors (being those entitled to vote on the relevant matter) must vote on it in the same way. Electronic means, as per the above, can be used to sign such resolutions.

    c. Alternate Directors

    The 2014 Act also permits a director to appoint, with the approval of a majority of directors, an alternate director to act in his or her place. An alternate director can be an existing director and so this could be an alternative method of limiting the number of physical signatures or attendees required in respect of corporate decision making.

    d. Members’ Written Resolutions

    Similar to the above, the 2014 Act permits the passage of unanimous and majority written resolutions by the members (or shareholders) of a company. This is frequently used instead of holding extraordinary general meetings. Again, certain formalities will need to be complied with to avail of this procedure, particularly in respect of majority, as opposed to unanimous, resolutions. Written resolutions are also not permitted for certain decisions (eg removal of a director).

    What action can your organisation take?

    As COVID-19 continues to spread globally, businesses should carefully consider:

    • the documents that need to be executed over the coming weeks;
    • how they plan to execute these documents in the event of a shut down;
    • how the decision making process will change given the spread of COVID-19; and
    • whether a company’s constitution or constitutional documents (if applicable) allows it to make decisions without having all the relevant parties physically together.

    If you would like to discuss the above, or the legal implications of COVID-19 on your organisation more generally, please contact Peter O’Neill or Ryan Duggan.

    Eversheds Sutherland is a full service international law firm with 69 offices in 34 countries including Dublin and Belfast. Given COVID-19’s global impact, we feel Eversheds Sutherland is best placed to provide businesses with advice from the necessary global perspective in order to help address the unique challenges posed by COVID-19.

    For more information contact

    Peter O’Neill, Partner in our Corporate and Commercial departments - peteroneill@eversheds-sutherland.ie

    Ryan Duggan, Associate in our Corporate department - ryanduggan@eversheds-sutherland.ie

    For support on legal issues facing your business in light of the outbreak of Covid-19, please visit our Coronavirus hub to get our latest information and guidance.

    This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

    < Go back