Newsflash: electronic signing relief lapses

By James Deady, Ben Hamilton, John Gray and Benjamin Wilson

Since May 2020 the Federal Government has provided temporary COVID-19 related regulatory relief to make it easier for companies to undertake electronic and remote execution of agreements and other documents.

This relief has been provided under a number of regulatory instruments that made temporary amendments to the Corporations Act 2001 (Cth) (Corporations Act) to clarify:

• that agreements and other documents that are signed electronically can have the benefit of the validity presumptions under sections 127-129 of the Corporations Act; and
• that officers of the same company can sign counterpart copies of an agreement or other document (often referred to as ‘split execution’) and still have the benefit of these validity presumptions.

The most recent of these regulatory instruments was the Corporations (Coronavirus Economic Response) Determination (No 3) 2020 (Cth) (Determination No 3).

Determination No 3 lapsed on 21 March 2021 and has not been replaced with either further temporary relief or permanent changes to the Corporations Act.

As a result, companies will now return to the pre-COVID-19 relief position concerning electronic execution, which gave rise to uncertainty regarding the extent to which agreements and other similar documents could be executed electronically and by ‘split execution’ (particularly following the decision of the Supreme Court of South Australia in Bendigo and Adelaide Bank Limited v Pickard [2019] SASC).

It was anticipated that a position similar to the temporary measures provided for under Determination No 3 would be permanently legislated in the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Bill) currently before parliament. However, the Bill was not passed before 21 March 2021 and debate on the Bill has now been adjourned, making it unlikely that the Bill will be passed in the immediate future.

We therefore recommend that companies take appropriate steps to adapt their document execution practices to reflect that this temporary relief is no longer in place. In the context of seeking to rely on the presumptions under sections 127-129, this would involve ensuring that the relevant signatories sign the same ‘static’ document by hand. Those signatories would be two directors or a director and secretary or, in the case of a sole director proprietary company, that sole director.

Hall & Wilcox has extensive experience advising on electronic document execution issues. For more information, please contact our Technology & Digital Economy team.