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electronic signing of documents by companies

30 October 2020
chelyn murphy
Read Time 4 mins reading time

pre-COVID-19 position

Australian electronic transactions legislation provides that where signatures are required under law, the requirement is taken to have been met for an electronic signature if the signatory consents to signing electronically, and there is a reliable method that identifies the signatory and indicates their intention.

However, because the Corporations Act 2001 (Cth) is excluded from the operation of the electronic transactions legislation, there has been uncertainty as to whether a document signed electronically by a company is valid. This is especially the case for a company’s signing of a deed, which, in order to be a deed under common law, requires that the instrument be written on parchment, vellum or paper.

Case law has also imposed limitations on “split executions” of documents by companies, such that there must be a single static document for a valid execution under the Corporations Act (and not signatures appearing on different counterparts or copies of the same document).

temporary COVID-19 measures

COVID-19 has resulted in various measures implemented by the Australian state and federal governments to facilitate continuation of business while preventing the spread of the virus. One of these measures included a determination made by Treasurer Josh Frydenberg in May 2020, namely, the Corporations (Coronavirus Economic Response) Determination (No 1) 2020 (Cth), to allow companies to hold meetings using technological means (without the need for persons to be physically present in the same place) and to sign documents electronically.

The Determination (No 1) was scheduled to be repealed six months after its making. The Determination (No 1) was recently repealed and replaced by the Corporations (Coronavirus Economic Response) Determination (No 3) 2020 (Cth) which extends the arrangements until 22 March 2021.

The Determination effectively modifies section 127 of the Corporations Act to enable a company registered under the Corporations Act to execute a “document” (including an electronic document) if the sole director and secretary (for a company with a sole director who is also a sole secretary), or two directors or a director and a secretary of a company (for a company with more than one director) either:

  • signs a copy or counterpart of the document in physical form; or
  • uses electronic communication which reliably identifies the person and indicates their intention about the contents of the document.

In either case, the physical or electronic communication must include the entire contents of the document but does not need to include the signature of another person signing the document physically or electronically. This means that the whole of the signed document should be retained, and not just the signature pages.

The examples given by the Explanatory Statement of the means by which officers of a company may sign a document electronically include:

  • pasting a copy of a signature into a document;
  • signing a PDF on a tablet, smartphone or laptop using a stylus or finger; and
  • cloud-based signature platforms like DocuSign.

effect of the measures

The modifications mean that a company’s officers do not need to sign the same physical document. Rather, a document could be effectively signed and scanned by the first signatory and then printed and signed by the second signatory, or separate electronic signatures could be applied to fully electronic versions of the document.

In addition, while the Determination is in effect, there is no need for a “single static document” in order to satisfy section 127 of the Corporations Act. This means that officers of a company may sign a document (by wet-ink or electronically) without the need for that document to include the signature of the other officer signing the document.

If the signing by a company of a document is carried out using electronic communications, there must be a reliable method to identify each signatory and their intention to execute the document on behalf of the company (for example, for digital signatures, using software provided by a reputable provider of electronic signature technology which includes a high level of verification and authentication measures (such as verification of identity through a certificate authority)).

Care should also be taken for the execution of deeds by a company. While some commentators have interpreted the reference in the Determination to a “document” as including a deed in electronic form (and therefore displacing the “paper rule” for a deed under common law), this is not explicitly addressed in the Determination or Explanatory Statement. Accordingly, further measures may need to be taken where a company intends to execute a deed using electronic signatures.

Please contact us if you require more detailed advice.

stay up to date with our news & insights

electronic signing of documents by companies

30 October 2020
chelyn murphy

pre-COVID-19 position

Australian electronic transactions legislation provides that where signatures are required under law, the requirement is taken to have been met for an electronic signature if the signatory consents to signing electronically, and there is a reliable method that identifies the signatory and indicates their intention.

However, because the Corporations Act 2001 (Cth) is excluded from the operation of the electronic transactions legislation, there has been uncertainty as to whether a document signed electronically by a company is valid. This is especially the case for a company’s signing of a deed, which, in order to be a deed under common law, requires that the instrument be written on parchment, vellum or paper.

Case law has also imposed limitations on “split executions” of documents by companies, such that there must be a single static document for a valid execution under the Corporations Act (and not signatures appearing on different counterparts or copies of the same document).

temporary COVID-19 measures

COVID-19 has resulted in various measures implemented by the Australian state and federal governments to facilitate continuation of business while preventing the spread of the virus. One of these measures included a determination made by Treasurer Josh Frydenberg in May 2020, namely, the Corporations (Coronavirus Economic Response) Determination (No 1) 2020 (Cth), to allow companies to hold meetings using technological means (without the need for persons to be physically present in the same place) and to sign documents electronically.

The Determination (No 1) was scheduled to be repealed six months after its making. The Determination (No 1) was recently repealed and replaced by the Corporations (Coronavirus Economic Response) Determination (No 3) 2020 (Cth) which extends the arrangements until 22 March 2021.

The Determination effectively modifies section 127 of the Corporations Act to enable a company registered under the Corporations Act to execute a “document” (including an electronic document) if the sole director and secretary (for a company with a sole director who is also a sole secretary), or two directors or a director and a secretary of a company (for a company with more than one director) either:

  • signs a copy or counterpart of the document in physical form; or
  • uses electronic communication which reliably identifies the person and indicates their intention about the contents of the document.

In either case, the physical or electronic communication must include the entire contents of the document but does not need to include the signature of another person signing the document physically or electronically. This means that the whole of the signed document should be retained, and not just the signature pages.

The examples given by the Explanatory Statement of the means by which officers of a company may sign a document electronically include:

  • pasting a copy of a signature into a document;
  • signing a PDF on a tablet, smartphone or laptop using a stylus or finger; and
  • cloud-based signature platforms like DocuSign.

effect of the measures

The modifications mean that a company’s officers do not need to sign the same physical document. Rather, a document could be effectively signed and scanned by the first signatory and then printed and signed by the second signatory, or separate electronic signatures could be applied to fully electronic versions of the document.

In addition, while the Determination is in effect, there is no need for a “single static document” in order to satisfy section 127 of the Corporations Act. This means that officers of a company may sign a document (by wet-ink or electronically) without the need for that document to include the signature of the other officer signing the document.

If the signing by a company of a document is carried out using electronic communications, there must be a reliable method to identify each signatory and their intention to execute the document on behalf of the company (for example, for digital signatures, using software provided by a reputable provider of electronic signature technology which includes a high level of verification and authentication measures (such as verification of identity through a certificate authority)).

Care should also be taken for the execution of deeds by a company. While some commentators have interpreted the reference in the Determination to a “document” as including a deed in electronic form (and therefore displacing the “paper rule” for a deed under common law), this is not explicitly addressed in the Determination or Explanatory Statement. Accordingly, further measures may need to be taken where a company intends to execute a deed using electronic signatures.

Please contact us if you require more detailed advice.