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legislation permitting electronic signing by companies made permanent

01 March 2022
chelyn murphy
Read Time 2 mins reading time

As foreshadowed in our previous Insight, laws to permanently allow Australian companies to electronically sign documents are now in place.

COVID-19 restrictions over the past 2 years have highlighted the need for companies to be able to validly sign documents through alternate methods that do not involve face-to-face meetings and/or wet-ink signatures. Various temporary measures were put in place, which then expired and were subsequently reinstated, enabling the measures to continue until April 2022. Fortunately, the temporary measures have now been made permanent with the recent passing of the Corporations Amendment (Meetings and Documents) Bill 2021 (Cth). The Bill has now received assent, and the relevant parts commenced on 23 February 2022.

permanent amendments to the corporations act

The new laws amend the Corporations Act 2001 (Cth) to permanently allow certain documents to be signed in “flexible and technology neutral manners”.

The new laws also allow companies to hold meetings at physical locations, using technology (a “hybrid” meeting), or (if permitted by the company’s constitution) virtual meetings.

requirements for electronic signing

The new laws enable companies to validly sign, in physical or electronic form:

  • documents (including deeds) under section 127 of the Corporations Act (for example, by a sole director, by two directors, or by a director and a secretary); and
  • documents under the Corporations Act relating to certain meetings or resolutions.

A person is taken to have signed such a document if:

  • the method identifies the person and indicates their intention in respect of the information recorded in the document; and
  • the method used was either as “reliable as appropriate” for the purpose for which the information was recorded, or proven in fact to have fulfilled the functions described in the preceding point.

The Explanatory Memorandum provides that in establishing the person’s identity, the signature method need not be a unique identifier, but should identify the person signing the document.

The new laws clarify that persons signing on behalf of companies do not need to sign the same form or page of the document as another person or use the same signing method, and that the document signed does not need to include all the information recorded in the document.

That is, companies may use a mixture of wet-ink and electronic methods (eg by online platforms or using stylus tools to sign PDFs), and signatories are not required to sign the same copy of a document.

The laws also note that a company’s constitution may set out other ways in which a document may be executed.

electronic signing of deeds

The new laws provide that companies may execute deeds without that execution being witnessed (unless executing by common seal), regardless of whether the deed is in physical or electronic form, and without needing for the deed to be ‘delivered’.

A new note to the Corporations Act also clarifies that a document may be executed without the use of “paper, parchment or vellum”.

Even though the above appears to override various formal common law requirements for deeds (including the ‘paper rule’), care still needs to be taken when a company electronically signs deeds in states and territories that have not abolished such requirements (that is, jurisdictions outside of New South Wales, Victoria and Queensland).

other changes to signing by companies

Pleasingly, the new laws also change the previous laws to recognise the valid signing by:

  • sole director companies (with no company secretaries); and
  • agents of companies (including authorised signatories), without needing to be appointed by deed (including when signing deeds) or have their signature witnessed.

The effect of the above would mean that third parties will be able to rely on the assumptions in section 129 of the Corporations Act that a document has been “duly” executed if it has been signed in accordance with the above.

Please contact us if you require more detailed advice, including if you need us to review or update your company’s constitution.

stay up to date with our news & insights

legislation permitting electronic signing by companies made permanent

01 March 2022
chelyn murphy

As foreshadowed in our previous Insight, laws to permanently allow Australian companies to electronically sign documents are now in place.

COVID-19 restrictions over the past 2 years have highlighted the need for companies to be able to validly sign documents through alternate methods that do not involve face-to-face meetings and/or wet-ink signatures. Various temporary measures were put in place, which then expired and were subsequently reinstated, enabling the measures to continue until April 2022. Fortunately, the temporary measures have now been made permanent with the recent passing of the Corporations Amendment (Meetings and Documents) Bill 2021 (Cth). The Bill has now received assent, and the relevant parts commenced on 23 February 2022.

permanent amendments to the corporations act

The new laws amend the Corporations Act 2001 (Cth) to permanently allow certain documents to be signed in “flexible and technology neutral manners”.

The new laws also allow companies to hold meetings at physical locations, using technology (a “hybrid” meeting), or (if permitted by the company’s constitution) virtual meetings.

requirements for electronic signing

The new laws enable companies to validly sign, in physical or electronic form:

  • documents (including deeds) under section 127 of the Corporations Act (for example, by a sole director, by two directors, or by a director and a secretary); and
  • documents under the Corporations Act relating to certain meetings or resolutions.

A person is taken to have signed such a document if:

  • the method identifies the person and indicates their intention in respect of the information recorded in the document; and
  • the method used was either as “reliable as appropriate” for the purpose for which the information was recorded, or proven in fact to have fulfilled the functions described in the preceding point.

The Explanatory Memorandum provides that in establishing the person’s identity, the signature method need not be a unique identifier, but should identify the person signing the document.

The new laws clarify that persons signing on behalf of companies do not need to sign the same form or page of the document as another person or use the same signing method, and that the document signed does not need to include all the information recorded in the document.

That is, companies may use a mixture of wet-ink and electronic methods (eg by online platforms or using stylus tools to sign PDFs), and signatories are not required to sign the same copy of a document.

The laws also note that a company’s constitution may set out other ways in which a document may be executed.

electronic signing of deeds

The new laws provide that companies may execute deeds without that execution being witnessed (unless executing by common seal), regardless of whether the deed is in physical or electronic form, and without needing for the deed to be ‘delivered’.

A new note to the Corporations Act also clarifies that a document may be executed without the use of “paper, parchment or vellum”.

Even though the above appears to override various formal common law requirements for deeds (including the ‘paper rule’), care still needs to be taken when a company electronically signs deeds in states and territories that have not abolished such requirements (that is, jurisdictions outside of New South Wales, Victoria and Queensland).

other changes to signing by companies

Pleasingly, the new laws also change the previous laws to recognise the valid signing by:

  • sole director companies (with no company secretaries); and
  • agents of companies (including authorised signatories), without needing to be appointed by deed (including when signing deeds) or have their signature witnessed.

The effect of the above would mean that third parties will be able to rely on the assumptions in section 129 of the Corporations Act that a document has been “duly” executed if it has been signed in accordance with the above.

Please contact us if you require more detailed advice, including if you need us to review or update your company’s constitution.