In August 2021, the Federal Government passed the Treasury Laws Amendments (2021 Measures No 1) Act 2021 (‘Act’) to facilitate the electronic execution of documents under s127 of the Corporations Act 2001 (Cth) (‘Corporations Act’). These measures allow a wider range of methods for 2 directors/company secretaries to sign separate copies of the same document. However, these changes are temporary, effective from 14 August 2021 until 31 March 2022; and they have no retrospective application.
The Act was largely to mirror those that were implemented by the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 effective from 6 May 2020 to 21 March 2021 in light of the lockdowns around Australia and the ongoing uncertainty about companies signing documents electronically, easing the pressure on companies having troubles in wet-ink executions of documents.
As you may note from the effective dates of the legislations mentioned above, there is a clear gap in time from 21 March 2021 to 14 August 2021.
The meaning of “no retrospective application” is that the Corporations Act does not expressly permit electronic execution by companies in the period between 22 March 2021 and 13 August 2021.
How could a document be signed electronically?
The Act amends s127 by inserting a new sub-section 127(3B) which provides that in order to rely on company’s electronic execution, you must be satisfied that:
1. A method is used to identify the person and that method indicate the person’s intention to sign the document;
Longton’s Tip: This means that using digital signing platforms such as DocuSign and AdobeSign; or returning a signed document with a covering email acknowledging the intention to be bound with specific wordings such as “electronic signature of me, [insert name], affixed on [insert date/time]” below the relevant signature, will be satisfactory;
2. The copy or counterpart signing includes the entire contents of the document; and
Longton’s Tip: In relation to split execution, each counterpart must contain the entire contents of the document. This means you will need to send out the whole document to your counterpart rather than a single page containing the execution block for signing. If you sign the execution page of a document, extract it from the larger document, and send it to your counterparts as a single page, the requirements for electronic execution under s127 of the Act will not be satisfied.
3. The method of execution used must be reliable and appropriate for the purposes (or be proven in fact to have fulfilled the purpose) for which the document was generated.
Longton’s Tip: The Act did not mandate the use of any particular means of electronic execution as being “reliable”. But we can interpret this clause in accordance with the Explanatory Memorandum that for any method of electronic execution the director and/or the company secretary apply their signatures directly to, the documents would be considered as “reliable”.
What do you need to be aware of?
The Temporary Nature of the Act:
For now, the end date of the Act is 31 March 2022. This means that you may not be allowed to apply electronic execution to any documents after this date.
However, we do note that the Federal Government has recently released the draft legislation, Treasury Laws Amendment (Measures for Consultation) Bill 2021: Use of technology for meetings and related amendments, which introduces permanent reforms allowing companies to execute the company documents as well as deeds electronically under s127 of the Corporations Act. However, electronic execution will only become a permanent fixture in the Corporations Act once this bill is passed; otherwise, the changes outlined above will continue to expire on 31 March 2022.
What if the Document to be signed is a Deed?
Despite the implementation of the Act, all Australian jurisdictions have prescribed legal requirements for the execution of a valid deed. The laws in New South Wales, Victoria and Queensland permit the deeds to be executed electronically according the s127(1) and s127(3) of the Corporations Act; however, if the governing law of the deed is not three states mentioned above, the deed must be signed in wet ink on different hard copy counterparts of the deed.
Although the amendments to s127(1) permit split execution by officers of Australia to wet-ink on different hard copy counterparts of the deed, it is not the case when the company executes a document under s127(2). As the amendments do not expressly deal with witnessing the fixing of the common seal to a physical document, the persons who witness the fixing of the common seal can be allowed to observe by electronic means but must be signed on the same printed copy of the deed.
The electronic means of witnessing must be done in “real time” via audio visual link or a similar method, and also the witness should write a statement including the wordings to the effect of “the person observed the fixing of the seal by electronic means” as per s127(2) of the Corporations Act in the execution block.
S127 of the Corporations Act is only applicable to the execution of documents by a company registered under the Corporations Act, therefore foreign companies that do not have the Australian Registered Body Number (ARBN) cannot execute under this section.
*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice beforetaking any course of action.*
Senior Associate | Accredited Property Law Specialist NSW | Nationally Accredited Mediator
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