News & Insights

Australian companies, particularly those affected by widespread lockdown restrictions, can breathe a sigh of relief following the passing of Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Cth) (Bill). While various measures were put in place to support companies throughout the pandemic, the expiry of temporary arrangements allowing electronic signing have caused grief for companies functioning during the current COVID-19 restrictions.

In 2020, temporary measures were instituted by the Federal Government in allowing companies to execute documents electronically. The changes were covered in our Insight last year detailing the electronic signing of documents and the impact of the measures for Australian companies.

To the disappointment of many, such temporary arrangements, implemented via a Determination made by the Treasurer, expired on 21 March 2021. As noted in our previous Insight, the “pre-COVID” position had applied for companies wishing to sign documents electronically since the expiry of such laws.

Fortunately, the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Cth) has been passed by both Houses and the relevant parts of the Bill have been assented to. The legislation allows companies to validly sign documents by way of electronic signatures where certain requirements are met.

amendments to the corporations act

Among other things, the Bill amends the Corporations Act 2001 (Cth) to allow electronic means or alternative technologies to be used to meet the requirements in the Corporations Act relating to:

• executing company documents;
• holding directors’ meetings, shareholders’ meetings (including Annual General Meetings) and meetings of members of a registered scheme;
• executing documents relating to meetings;
• recording, keeping and providing minutes; and
• providing notices of meetings and other documents relating to meetings to prospective attendees.

proposed new measures

As was the case with the previous Determination, the new laws enable companies to execute documents under section 127 of the Corporations Act, for example, by a sole director who is also the sole secretary, by two directors, or by a director and a secretary. The document can be signed by:

• the person signing a physical copy or counterpart of a document; or
• the person signing an electronic copy or counterpart of a document, provided that a method is used to identify the person and to indicate their intention to sign a copy or counterpart of the document. For example, the signatory may use a stylus to sign a PDF document and then email the document, or they may use a platform such as DocuSign.

The method must also be as “reliable as appropriate” for the purposes for which the document was generated or proven in fact to have indicated the person’s identity and intention.

Where signing a copy or counterpart, the copy or counterpart must include the entire contents of the document. The copy or counterpart does not need to include the signature of another signatory to the document, or any material within the document to identify the other signatory or to indicate their intention. That is, there is no need for a “single static document” to satisfy section 127 of the Corporations Act (reversing the previous position according to caselaw).

In addition, companies may continue to sign documents in the traditional manner by applying wet signatures to the physical paper document. The new laws also permit a combination of different methods to execute company documents. For example, one director may physically sign a paper version of the document while the second director could sign the document electronically.

types of documents that can be signed electronically

The changes apply to all documents executed by a company under section 127 of the Corporations Act, including agreements, resolutions and documents related to meetings. This includes all documents executed with a common seal and documents executed without a common seal.

Interestingly, a new note has been inserted in the Corporations Act to clarify that the new laws also apply to documents executed as a deed. The Explanatory Memorandum to the Bill provides that this means that “companies do not need to follow the established process for signing, sealing and delivering a deed under common law”.

It should be noted that, as there has been no express abolition of the “paper rule” (requiring for deeds to be written on paper, parchment or vellum), caution needs to be taken for a company executing a deed electronically. This applies particularly to states and territories where there is no local legislation in place allowing for the electronic signing of deeds (that is, jurisdictions outside of New South Wales, Victoria and Queensland).

how long will the changes remain in place?

The amendments will remain in force until 1 April 2022, upon which they cease to apply. The Federal Government, however, intends to implement permanent reforms to continue to allow companies to electronically sign company documents and send meeting-related materials electronically. For this purpose, exposure draft legislation (not yet in the form of a Bill) was issued in July for consultation.

Please contact us if you require more detailed advice.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.