The Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (the amending Act) came into effect on 14 August 2021 and makes transitional amendments to the Corporations Act 2001 (Cth) (the Act) to allow for electronic and split execution of documents by companies under section 127. 

The Federal Treasurer implemented similar temporary amendments to facilitate electronic execution of company documents in response to the COVID-19 pandemic, which we wrote about here.  Those amendments were automatically repealed on 21 March 2021 and until now were not replaced, leaving electronic execution in the lurch for the past 5 months. 

The provisions in the amending Act are also temporary and will cease having effect on 31 March 2022, unless they are extended.  They do not have retrospective effect.

Electronic Execution

When transacting with a company, section 127 of the Act provides statutory comfort that a company will be bound by a document where certain conditions are met (e.g. the document is signed by two directors of the company).

The amendments to the Act confirm a document will still be executed in accordance with section 127 of the Act by:

  • Witnessing the Common Seal: the fixing of a common seal to a document in accordance with section 127(2) of the Act being witnessed electronically, where:
    • the person observes the fixing of the seal by electronic means;
    • signs the document; and
    • includes a statement that they observed the fixing of the seal by electronic means

(section 127(2A) of the Act).

  • Physical Copy or Counterparts: signing a copy or counterpart of the document in a physical form which includes the entire contents of the document (section 127(3A) of the Act).  This means each party should always sign and deliver the full document, not just the signature page.
  • Electronic Copy or Counterparts: a document is taken to have been signed by a person if a reliable and appropriate method is used to identify the person and to indicate the person’s intention to sign a copy or counterpart of the document.  The copy or counterpart must include the entire contents of the document (section 127(3B) of the Act).  

The amendments further clarify that:

  • Split Signatures: a copy or counterpart of a document does not need to include the signature of another person signing the document or any material relating to another person’s signature (section 127(3C) of the Act).  This means (for example) two directors may sign separate counterparts on behalf of the same company)
  • Deeds: the provisions allowing electronic witnessing of the common seal, electronic execution of documents and split signatures also apply to the execution of deeds (section 127(3) of the Act).

Observations

The COVID-19 pandemic has highlighted the logistical difficulties which often arise when obtaining signatures with wet-ink from parties located in different state, or even different countries.  This challenge is further exacerbated when split execution (i.e. two directors signing separate counterparts on behalf of the same company) is not allowed.

The temporary amendments will be welcomed by the business community, as the ability for companies to execute documents electronically makes it significantly easier for parties transact in the digital world.  Hopefully, the amendments will be replaced with more permanent reforms, to provide ongoing certainty around execution of documents by companies.

It is very important, when executing documents electronically, to ensure the legal requirements for enforceable electronic signatures are met.  This includes drafting documents to facilitate the use of electronic signatures and using two-factor authentication to identify the person signing the document.

This article was co-written by Emily Taylor.

This article is not legal advice.  It is intended to provide commentary and general information only.  Access to this article does not entitle you to rely on it as legal advice.  You should obtain formal legal advice specific to your own situation.  Please contact us if you require advice on matters covered by this article.

Andrew Windybank

Andrew Windybank -

Principal

Corporate and commercial law specialist