Temporary measures were introduced in response to COVID to allow companies to sign documents electronically and enable them to operate as close to business as usual as possible.
The Corporations Amendment (Meetings and Documents) Bill 2021 (Bill) makes these temporary measures permanent and became law on 22 February 2022. The Bill also brings a few other perks and updates which companies will find useful moving forward. We explore these below:
1. Technology neutral signing
The Bill allows a company the flexibility to sign documents by:
- its officers under section 127 of the Corporations Act 2001 (Cth) (Act); or
- its agents under section 126 of the Act,
by hand or electronically so long as:
(a) the method of signing identifies the person and indicates their intention in respect of the information recorded in the document; and
(b) 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 dot point above.
What this effectively means is that as long as points 1 and 2 are satisfied, then the parties do not have to sign in the same format (ie one can apply a wet signature and the other an electronic signature).
2. Execution by company officers under section 127 of the Act
Split execution permitted
Split execution is now accepted. What this effectively means is that officers do not need to sign the same document or use the same signing methods (ie one director can sign a hard copy, and another director can sign electronically).
Signatures should however appear together on the same execution panel.
No need to include the entire contents of the document when circulating internally
Where two company officers are required to sign a document, officers don’t have to share the entire document with each other. This means officers can sign and send to each other the signature pages only.
The full document (with both signatures) does however still need to be shared with the other side in order to properly exchange the document and for there to be a valid agreement or deed.
Sole director companies
Previously, companies with just a sole director and no company secretary could not execute a document under section 127 of the Act. The Bill resolves this technicality to allow these companies to execute documents under section 127 of the Act, whether or not the sole director is also sole secretary.
3. Execution as agent under section 126 of the Act
The Bill allows individuals to potentially sign all types of documents, including deeds, electronically as agents for a company under section 126 of the Act. In doing so, the Bill removes a lot of the traditional requirements associated with signing deeds (as opposed to agreements), including:
(a) removing the requirement for a deed to be “delivered”, so that they are effective on signing;
(b) removing the need for an agent’s signature to be witnessed; and
(c) making it clear that agents do not themselves need to be appointed by deed formally signed by the company (under section 127 of the Corporations Act) in order to sign a deed for the company.
Note though that the changes do not apply to:
- the execution of documents by foreign and statutory corporations; and
- the situation where the agent signing for a company is another corporation and not an individual.
In summary, the Bill equips companies with many much-needed tools in order for them to continue treading forward in the face of the much-changed business landscape. As with any changes to such well-established parts of the law however, it waits to be seen if the position needs to be further fine-tuned and refined.
Authors: Eric Kwan & Samantha Pacchiarotta
Contributing partner: Jason Sprague