Electronic signing of documents by companies
- People signing on behalf of a company will no longer be required to physically ‘wet’ sign documents or do so in the presence of a witness.
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The regime is technology neutral and does not specify ways of signing a document that are allowed versus those that aren’t.
Covid-19 has caused considerable stress and misery but every cloud has a silver lining and that lining in the case of covid-19 may be the speedy development of a regime for permitting companies to sign documents using electronic means rather than the so-called ‘wet’ signatures of directors.
On 10 February 2022, the Corporations Amendment (Meetings and Document) Act 2021 was passed by both houses belatedly bringing the signing of documents by companies into the 21st century.
The electronic signing laws come into effect on the day after the Act received Royal Assent.
Changes permitting the holding of virtual meetings come into effect on 1 April 2022.
We enjoyed electronic signing laws during lockdown but further consultation by the Commonwealth government led to further improvements on the lockdown regime.
The regime will simplify the execution process.
People signing on behalf of a company will no longer be required to physically ‘wet’ sign documents or do so in the presence of a witness. The regime is technology neutral and does not specify ways of signing a document that are allowed versus those that aren’t.
Signatories will also be allowed to sign only the signature pages of a document rather than the whole document.
From the Commonwealth’s perspective, companies may sign deeds electronically, though it is important to note that State and Territory law also has much to say about what constitutes a deed and how it may be signed.
A director of more than one company can now sign a document once on behalf of all the companies in the group to which that director is appointed and officers of a company (directors, secretaries etc) are no longer required to sign the same document. They can sign identical counterparts.
It is a common trap that the sole director of a private company forgets to formally appoint themselves as the company secretary which can lead to real issues when it comes to the proper execution of documents both under the company’s constitution and the law.
Section 127 of the Corporations Act 2001 (Cth) sets out how a company may execute a document and s.129 of that Act says that provided that form of execution is followed then a third party can rely on that execution as being lawful and does not have look behind it to make sure that the company followed all its internal rules.
Sole directors of private companies will now not have to worry about their formal appointment as company secretary because the sole director is now authorised to sign documents pursuant to section 127 of the Corporations Act, and third parties can rely on that execution based on the permitted assumptions under section 129.
Private companies can act through agents for the sake of convenience and to avoid the need for directors or boards to be constantly involved. Under the new rules people who act as agents of a company, including where the company has appointed an attorney under power, can make, change, ratify or release a contract or execute documents (including deeds) on behalf of a company.
The formal validity assumptions in section 129 of the Corporations Act will extend to those individual agents signing under the new section 126 and those agents no longer need to be appointed by deed in order to execute deeds.
Despite the benefit of these changes it is important to note that, except as outlined above, the new regime does not apply to the signing of documents by individuals (as opposed to companies). Signing by individuals is regulated by the States and Territories and we must look to those local laws for the rules that apply.
Let’s hope those local rules can be standardised across Australia soon.
For further information, please call Townsends Business & Corporate Lawyers on 02 8296 6222 or email info@townsendslaw.com.au