Electronic signatures - permanent measures coming
- Temporary electronic execution was widely accepted and, often preferred
- Permanent measures will avoid uncertainties and continue the efficiency and convenience of electronic execution
- These changes raise the issue of whether the company needs to change its constitution in order to be able to rely on the powers in the legislation
What were once the rules about executing legal documents using handwritten (so-called ‘wet’) signatures have been completely altered to allow for Covid-19 safety measures.
The temporary allowance of electronic execution was widely accepted and, in most cases, preferred. Permanent measures are now coming to avoid uncertainties and continue the efficiency and convenience of electronic execution.
The Corporations Amendment (Meetings and Documents) Bill 2021 (Cth) (‘The Bill’), is set to amend the Corporations Act 2001 to permit companies to execute documents electronically across all jurisdictions in Australia on a permanent basis.
The electronic signing allows for the execution of documents and deeds on behalf of companies.
Importantly the Bill ensures that electronic execution will constitute compliance with sections 126, 127 and 129 of the Corporations Act 2001 (the Act) which means the protections offered by those sections will be extended to documents that have been executed electronically.
Those protections effectively mean that a person can rely on a document as having been properly executed by a company if that execution occurs electronically.
Previously a company with a sole director also had to appoint that director as the company secretary to enable the company to properly execute documents. Now companies with a sole director but without a company secretary may execute documents purely via the signature of the sole director without the need for that secretary.
Important notes to consider:
- The director’s signature should have their signature identify their full name and their intention to be bound by the document in the execution area.
- Any document signed electronically should be subjected to protocols of safely storing the document to minimise risks of copying the signature.
- All parties are required to consider the regulations of their specific jurisdictions as opposed to what is required in the Federal government’s Electronic Transactions Act 1999.
- Specific clauses referencing the Electronic Transactions Act 1999 should be referenced stating that the parties signed electronically under the Act.
- Upon receipt of digital signature documents, verification protocols may be recommended.
The permanent changes to the Corporations Act 2001 (Cth) came into effect 1 April 2022.
These changes raise the issue of whether the company needs to change its constitution in order to be able to rely on the powers in the legislation.
Generally, the constitution will set out provisions on how a company must execute a document. If there are no such provisions, the Corporations Act 2001 will apply.
The first question to ask is therefore whether the constitution states (or has the necessary effect) that the execution method set out in the constitution is the only applicable method and no other method can be followed. If not, the Corporations Act will apply.
If on the other hand the constitution does make that statement (or does have that effect) then it may need to be amended to allow for the electronic execution.
It is crucial to review the constitution carefully. Section 110A of the new Act is phrased that electronic signing is now appropriate for execution under s127 of the Corporations Act. If the company’s constitution allows for the company to execute a document in accordance with section 127 then it automatically will adopt the new provisions to sign electronically without necessary amendments.
For further information, please call Townsends Business & Corporate Lawyers on 02 8296 6222 or email firstname.lastname@example.org