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Businesses have had to adapt to a changing climate of restrictions and a lack of face-to-face communication – with Australia no different from the rest of the world. When the pandemic first hit, temporary measures were put in place to allow businesses to meet the regulatory requirements of the Corporations Act 2001 such as obtaining signatures and attending/conducting meetings electronically. What followed though, was a desire from companies to permanently allow these electronic concessions to continue as they have made significant advancements to ease and functionally of business.

In response to overwhelming demand, the Federal Government has introduced the Corporations Amendment (Meetings and Documents) Bill 2021 (the Bill) into Parliament. The Bill (if passed) will permanently allow companies to use technology to meet regulatory requirements under the Corporations Act 2001 (the Act).

Currently, Australian companies are reliant on temporary measures (due to expire on 1 April 2022) allowing the use of technology to meet the requirements of the Act. A detailed overview of these current measures may be found in our recent insight here.

If passed, the Bill will see many of the current measures continue permanently (in addition to other things), modernising the Act to reduce inconveniences and costs for Australian companies involved with wet-ink signatures and hard copy documents.

electronic signatures

As is the case with the current measures, the Bill continues to enable companies to execute documents (including deeds) electronically (section 127 of the Act).

The Bill also allows:

  • company agents to execute documents electronically when exercising the powers of a company (section 126 of the Act); and
  • documents (including deeds) relating to meetings to be signed electronically, including documents relating to:
  • a meeting of the members of a company or registered scheme;
  • a meeting of the directors of a company; and
  • a resolution to be considered by the directors or members of a company without a meeting.

 To preserve the integrity of the document, the Bill requires that the signature method identifies the person, indicates the person’s intention in respect of the information recorded in the document, and be “as reliable as appropriate” for that purpose (or prove in fact to fulfill that function). For example, the signatory may use a stylus to sign a PDF of the document and then email the document, or they may use a platform such as DocuSign.

Note although not currently legislated, good governance dictates that company directors and other officeholders should ensure safeguards are in place to protect the integrity of their signatures to mitigate any potential risk of fraudulent activity. Future technologies may be developed to further mitigate this risk in the future.

When signing a copy or counterpart of a document, a person does not need to sign the same form or page of the document as another. That is, there is no need for a “single static document” when signing documents electronically. The Bill goes further than the temporary measures (and against case law) stating that all the information included in a document does not need to be included in a copy or counterpart signed by a person. Note that company directors and other officeholders should continue to sign copies and counterparts that include the entire contents of the documents until the Bill is passed.

 It should be noted that the terms of a company’s constitution will prevail in the event of a conflict between the constitution and the Act. Please contact us if you would like us to assist in ensuring that your constitution gives the required flexibility for electronic execution.

electronic meetings

Continuing the temporary measures, the Bill allows companies and registered schemes to use technology to hold meetings of members. Companies may hold a meeting:

  • at one or more physical location (a physical meeting);
  • at one or more physical location and using virtual meeting technology (a hybrid meeting); or
  • using virtual meeting technology only if this is required or permitted by the company’s constitution expressly (an online meeting).

 

If a company holds a meeting of its members:

  • the company must give all members a reasonable opportunity to participate (irrespective of the mode of the meeting); and
  • company directors and officeholders must consider (amongst other things) the time and location of the meeting and further concessions to allow all members to participate virtually.

electronic notices

Companies may send meeting-related documents electronically if it is reasonable to expect that the document would be readily accessible and usable by the recipient. Such documents may include (but are not limited to):

  • notices of meetings;
  • notices of a resolution or a record of a resolution;
  • notices of a statement in relation to a meeting or a matter to be considered at a meeting; and
  • minute books (if applicable).

A member of a company may elect to receive documents electronically or physical form and the company will be required to comply with that election. A company may be liable if it fails to provide a document in the member’s elected form and may be required to provide notice to its members regarding their right to elect in certain instances.

next steps

The Bill was introduced to Parliament on 20 October 2021. No proposed amendments have been circulated at this time. A report on the Bill is due from the Senate Economics Legislation Committee on 18 November 2021. The Bill is expected to become law on 1 April 2022, after the current measures expire. To avoid doubt, all Australian companies should continue to abide by the current measures until their expiry.

If you would like more advice regarding the contents of the Bill or advice regarding how to amend your company’s constitution to enjoy all the proposed benefits, please contact us.

stay up to date with our news & insights

electronic concessions here to stay under the Corporations Act 2001

17 November 2021
brad phillips timothy edwards

Businesses have had to adapt to a changing climate of restrictions and a lack of face-to-face communication – with Australia no different from the rest of the world. When the pandemic first hit, temporary measures were put in place to allow businesses to meet the regulatory requirements of the Corporations Act 2001 such as obtaining signatures and attending/conducting meetings electronically. What followed though, was a desire from companies to permanently allow these electronic concessions to continue as they have made significant advancements to ease and functionally of business.

In response to overwhelming demand, the Federal Government has introduced the Corporations Amendment (Meetings and Documents) Bill 2021 (the Bill) into Parliament. The Bill (if passed) will permanently allow companies to use technology to meet regulatory requirements under the Corporations Act 2001 (the Act).

Currently, Australian companies are reliant on temporary measures (due to expire on 1 April 2022) allowing the use of technology to meet the requirements of the Act. A detailed overview of these current measures may be found in our recent insight here.

If passed, the Bill will see many of the current measures continue permanently (in addition to other things), modernising the Act to reduce inconveniences and costs for Australian companies involved with wet-ink signatures and hard copy documents.

electronic signatures

As is the case with the current measures, the Bill continues to enable companies to execute documents (including deeds) electronically (section 127 of the Act).

The Bill also allows:

  • company agents to execute documents electronically when exercising the powers of a company (section 126 of the Act); and
  • documents (including deeds) relating to meetings to be signed electronically, including documents relating to:
  • a meeting of the members of a company or registered scheme;
  • a meeting of the directors of a company; and
  • a resolution to be considered by the directors or members of a company without a meeting.

 To preserve the integrity of the document, the Bill requires that the signature method identifies the person, indicates the person’s intention in respect of the information recorded in the document, and be “as reliable as appropriate” for that purpose (or prove in fact to fulfill that function). For example, the signatory may use a stylus to sign a PDF of the document and then email the document, or they may use a platform such as DocuSign.

Note although not currently legislated, good governance dictates that company directors and other officeholders should ensure safeguards are in place to protect the integrity of their signatures to mitigate any potential risk of fraudulent activity. Future technologies may be developed to further mitigate this risk in the future.

When signing a copy or counterpart of a document, a person does not need to sign the same form or page of the document as another. That is, there is no need for a “single static document” when signing documents electronically. The Bill goes further than the temporary measures (and against case law) stating that all the information included in a document does not need to be included in a copy or counterpart signed by a person. Note that company directors and other officeholders should continue to sign copies and counterparts that include the entire contents of the documents until the Bill is passed.

 It should be noted that the terms of a company’s constitution will prevail in the event of a conflict between the constitution and the Act. Please contact us if you would like us to assist in ensuring that your constitution gives the required flexibility for electronic execution.

electronic meetings

Continuing the temporary measures, the Bill allows companies and registered schemes to use technology to hold meetings of members. Companies may hold a meeting:

  • at one or more physical location (a physical meeting);
  • at one or more physical location and using virtual meeting technology (a hybrid meeting); or
  • using virtual meeting technology only if this is required or permitted by the company’s constitution expressly (an online meeting).

 

If a company holds a meeting of its members:

  • the company must give all members a reasonable opportunity to participate (irrespective of the mode of the meeting); and
  • company directors and officeholders must consider (amongst other things) the time and location of the meeting and further concessions to allow all members to participate virtually.

electronic notices

Companies may send meeting-related documents electronically if it is reasonable to expect that the document would be readily accessible and usable by the recipient. Such documents may include (but are not limited to):

  • notices of meetings;
  • notices of a resolution or a record of a resolution;
  • notices of a statement in relation to a meeting or a matter to be considered at a meeting; and
  • minute books (if applicable).

A member of a company may elect to receive documents electronically or physical form and the company will be required to comply with that election. A company may be liable if it fails to provide a document in the member’s elected form and may be required to provide notice to its members regarding their right to elect in certain instances.

next steps

The Bill was introduced to Parliament on 20 October 2021. No proposed amendments have been circulated at this time. A report on the Bill is due from the Senate Economics Legislation Committee on 18 November 2021. The Bill is expected to become law on 1 April 2022, after the current measures expire. To avoid doubt, all Australian companies should continue to abide by the current measures until their expiry.

If you would like more advice regarding the contents of the Bill or advice regarding how to amend your company’s constitution to enjoy all the proposed benefits, please contact us.