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Expiry of temporary laws for electronic signing by companies

26 March 2021
chelyn murphy
Read Time 3 mins reading time

As covered in our previous Insight, temporary measures were instituted by the Federal Government allowing for companies to execute documents electronically.

These temporary arrangements expired on 21 March 2021.

It was anticipated that these measures would be extended via the passing of a new Bill. However, as at the date of publication, the Bill has not been passed. Senate debate on the Bill has been adjourned until the first sitting day in August 2021.

current status

As the temporary laws have expired, this means that the “pre-COVID” position applies for companies wishing to sign documents electronically (that is, the applicable laws applying before May 2020).

The Australian electronic transactions legislation (which facilitates the use of electronic signatures) does not apply to the Corporations Act 2001 (Cth). Accordingly, where a document is signed by a company by way of electronic signature, it is unclear whether a third party can rely on the assumptions of valid execution that apply where the document has been signed by the company pursuant to section 127 of the Corporations Act (e.g. by a sole director who is also the sole secretary, by two directors, or by a director and a secretary).

This uncertainty is even more pronounced in the case of the signing of deeds, particularly in jurisdictions that have not expressly abolished the “paper rule” (requiring for deeds to be written on paper, parchment or vellum).

Until the Bill is passed, or other measures put into place to recognise the validity of electronic signing by companies, the safest course would be for companies to revert back to signing documents by “wet-ink” signatures (especially deeds), if signing under section 127 of the Corporations Act. Companies should also take care to avoid “split executions” of documents, to enable there to be a single static document for a valid execution by the company (and not signatures appearing on different counterparts or copies of the same document).

For a company signing a document in a manner outside of section 127 (e.g. by an agent or an attorney with the requisite authority), it may be able to do by electronic signature provided that the relevant criteria under the electronic transactions legislation are met (that is, the signatory consents to signing electronically, and there is a reliable method that identifies the signatory and indicates their intention in respect of the document).

proposed new measures

The new Bill, being the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Cth)), seeks to amend the Corporations Act 2001 (Cth). It will allow electronic means or alternative technologies to be used to meet the requirements in the Corporations Act for executing company documents, holding meetings, and recording and providing minutes.

Specifically, the changes will enable companies to execute documents under section 127 of the Corporations Act by signing a physical or electronic copy or counterpart of a document, if certain requirements are met. There will be no need for a “single static document” in order to satisfy section 127 of the Corporations Act (reversing the previous position according to caselaw).

If passed, the amendments will remain in force until 16 September 2021. The Federal Government has also expressed its intention to implement permanent reforms to continue to allow companies to electronically sign company documents.

Please contact us if you require more detailed advice.

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Expiry of temporary laws for electronic signing by companies

26 March 2021
chelyn murphy

As covered in our previous Insight, temporary measures were instituted by the Federal Government allowing for companies to execute documents electronically.

These temporary arrangements expired on 21 March 2021.

It was anticipated that these measures would be extended via the passing of a new Bill. However, as at the date of publication, the Bill has not been passed. Senate debate on the Bill has been adjourned until the first sitting day in August 2021.

current status

As the temporary laws have expired, this means that the “pre-COVID” position applies for companies wishing to sign documents electronically (that is, the applicable laws applying before May 2020).

The Australian electronic transactions legislation (which facilitates the use of electronic signatures) does not apply to the Corporations Act 2001 (Cth). Accordingly, where a document is signed by a company by way of electronic signature, it is unclear whether a third party can rely on the assumptions of valid execution that apply where the document has been signed by the company pursuant to section 127 of the Corporations Act (e.g. by a sole director who is also the sole secretary, by two directors, or by a director and a secretary).

This uncertainty is even more pronounced in the case of the signing of deeds, particularly in jurisdictions that have not expressly abolished the “paper rule” (requiring for deeds to be written on paper, parchment or vellum).

Until the Bill is passed, or other measures put into place to recognise the validity of electronic signing by companies, the safest course would be for companies to revert back to signing documents by “wet-ink” signatures (especially deeds), if signing under section 127 of the Corporations Act. Companies should also take care to avoid “split executions” of documents, to enable there to be a single static document for a valid execution by the company (and not signatures appearing on different counterparts or copies of the same document).

For a company signing a document in a manner outside of section 127 (e.g. by an agent or an attorney with the requisite authority), it may be able to do by electronic signature provided that the relevant criteria under the electronic transactions legislation are met (that is, the signatory consents to signing electronically, and there is a reliable method that identifies the signatory and indicates their intention in respect of the document).

proposed new measures

The new Bill, being the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Cth)), seeks to amend the Corporations Act 2001 (Cth). It will allow electronic means or alternative technologies to be used to meet the requirements in the Corporations Act for executing company documents, holding meetings, and recording and providing minutes.

Specifically, the changes will enable companies to execute documents under section 127 of the Corporations Act by signing a physical or electronic copy or counterpart of a document, if certain requirements are met. There will be no need for a “single static document” in order to satisfy section 127 of the Corporations Act (reversing the previous position according to caselaw).

If passed, the amendments will remain in force until 16 September 2021. The Federal Government has also expressed its intention to implement permanent reforms to continue to allow companies to electronically sign company documents.

Please contact us if you require more detailed advice.