Electronic signatures are back for the time being

The Federal Government has now passed the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Amending Act) which amends the Corporations Act 2001 (Cth) (Corporations Act) to allow for technologically-assisted meetings and the long-awaited electronic execution of company documents.

These changes became effective on 14 August 2021.

As noted in our previous article, the Amending Act has been drafted in response to the expiry of reforms under Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Determination) which expired on 21 March 2021. The expiry of these reforms resulted in electronic execution of company documents (a popular move amongst company directors and advisors) being unavailable following expiry of the Determination. The Amending Act has addressed that anomaly.

Electronic Signing of Documents and Split Execution of Documents

The Amending Act amends the Corporations Act to allow:

• A person to witness fixing of a company seal by electronic means (section 127(2A)) if:
  • the witness signs the document, which may be a copy of the document without the common seal affixed; and
  • the document contains a statement that the witness observed the fixing of the seal by electronic means.
• A person to sign a document by signing a copy or a counterpart of the document (as opposed to both original signatures having to be affixed to the same document) (section 127(3A)); and
• A person to electronically sign a document (section 127(3B)) if:
  • An electronic method is used to identify the person and indicate their intention to sign the document;
  • the copy or counterpart of the document that includes the entire contents of that document; and
  • the method used was reliable and appropriate for the purposes (or be proven in fact to have fulfilled that purpose).

Virtual Meetings

The Amending Act also amends the Corporations Act to:

• allow meetings at one or more physical venues, wholly virtual meetings (if allowed for in a company’s constitution), and part virtual and part physical meetings;
• depending on how a meeting is held, deem the meeting as having taken place at a certain venue, provided that the meeting time is held ‘at a reasonable time’ at that venue and it must be reasonable to hold the meeting at that venue;
• allow any document that relates to a meeting to be given electronically and to be signed electronically;
• set default voting to a show of hands unless a poll is demanded by members with at least 5% of the votes; and
• provide clarity that a court may only set aside a meeting where members as a whole did not have a reasonable opportunity to participate in the meeting and a substantial injustice has been caused (or may be caused) that cannot be remedied by any other order of the court.

Observations

Amending Act’s reforms only temporary

The above changes will only remain in effect until 31 March 2022 (section 1679F). This means that, unless the changes are extended or are made permanent, companies will no longer be able to electronically sign documents or hold virtual meetings after that date. Company officers will need to be aware of this date and be prepared to return to physically signing documents, witnessing company documents, and holding in person meetings unless further changes are made.

ASIC’s ‘no action’ position on virtual meetings

It is also likely ASIC’s ‘no action’ position to virtual meetings will be amended. ASIC previously issued a media release stating a ‘no action’ position would be taken concerning virtual meetings after the expiry of the Determination on 21 March 2021. As the Amending Act provides guidance on how virtual meetings are to be conducted, ASIC is now likely to enforce these new provisions of the Corporations Act if virtual meetings are held.

No ASIC ‘no action’ on electronic signature

ASIC has not issued a ‘no action’ position with regard to electronically signed company documents, commenting that this is primarily an issue between private parties.

While it is arguable that a party to a contract might challenge the validity of the contract based on an argument that it was deficiently executed by a company pursuant to the Corporations Act, there are likely to be grounds on which the contract can be upheld (for example, on the basis of mutual promises passing between the parties, or a promissory estoppel). Nevertheless, we would recommend that companies review key contracts that were executed before the Amending Act came into force, to verify they have been correctly executed.

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Authored by:

Antoine Pace, Partner
Raisa Blanco, Senior Associate
Eric Chen, Lawyer