Update: Electronic signing (hopefully) here to stay
By James Deady and James Pavlidis
The Federal Government has released an exposure draft of legislation that would permanently reform the Corporations Act 2001 (Cth) to clarify the law regarding electronic execution of documents by companies (Exposure Draft).
Historically, there has been a divergence of views as to a company’s ability to execute documents:
- electronically, including using DocuSign or other electronic signing platforms; or
- by ‘split execution’, where officers of the same company sign counterpart copies of an agreement or other document.
In May 2020, the Federal Government provided temporary COVID-19-related regulatory relief to make it easier for companies to undertake electronic and remote execution of agreements and other documents. Specifically, the relief made temporary amendments to the Corporations Act and provided:
- 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
- a document signed by way of split execution can still have the benefit of these validity presumptions.
This temporary relief was set out in a number of regulatory instruments. However the relief lapsed on 21 March 2021 and was not extended, meaning that the uncertainty regarding electronic and split execution remains.
The Exposure Draft would resolve this uncertainty by permanently making changes to the Corporations Act to provide a statutory mechanism for companies to execute documents electronically. The proposed changes provide that when a company executes a document:
- persons may sign the document electronically – this requires three conditions to be met:
- the copy must include the entire contents of the document (it is not possible to circulate and sign the execution page only);
- a method must be used to identify the person and indicate their intention to sign the document; and
- the method must 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. While a technology neutral approach is taken in the Exposure Draft, the use of platforms such as DocuSign would fulfil these last two requirements.
- separate copies of the document may be used by each person required to execute the document – this allows for split execution by officeholders of the same company;
- the document may be executed by the sole director of a proprietary company that does not have a company secretary – this resolves an historical issue with the drafting of the due execution assumptions in sections 127 and 129 of the Corporations Act, which do not currently apply to a company with a sole director who is not also the sole company secretary; and
- the fixing of the seal can be witnessed electronically – this must follow a specified process of using technology to observe the fixing of the seal, signing the document or a copy or counterpart and annotating the document with a statement that they have observed the fixing of the seal electronically.
Importantly, these proposed changes do not have a sunset date (unlike the previous draft legislation) and will apply permanently if passed.
The Federal Government is currently seeking feedback on the Exposure Draft, with submissions due by 16 July 2021.
The Exposure Draft would also make permanent reforms to the Corporations Act regarding companies holding virtual meetings and providing notices electronically. Our colleagues Michelle Eastwell and Vanessa Murphy have provided a summary of these changes in ‘Electronic meetings and electronic execution of company documents are (hopefully) here to stay’.
Hall & Wilcox has extensive experience advising on electronic document execution issues. For more information, please contact our Technology & Digital Economy team.
 Treasury Laws Amendment (Measures for Consultation) Bill 2021: Use of technology for meetings and related amendments.
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