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International arbitration report
In this edition, we focused on the Shanghai International Economic and Trade Arbitration Commission’s (SHIAC) new arbitration rules, which take effect January 1, 2024.
Electronic execution of documents for Australian companies is here to stay
What you need to know about the Corporations Amendment (Meetings and Documents) Act 2022 (Cth)
Author:
Australia | Publication | marzo 2022
Due to restrictions imposed by the COVID-19 pandemic, there was an increasing focus on facilitating electronic execution of all kinds of documents for Australian companies, as well as “split” execution (execution by multiple signatories for the one party, such as two company officers, of separate copies in different locations). In response to this, a number of temporary amendments to the Corporations Act 2001 (Cth) (Corporations Act) were put in place during 2020 and 2021, with a difficult hiatus between such measures1 as the country continued to deal with lockdowns.
With the latest round of temporary measures set to expire 31 March 2022, corporate Australia had been waiting with some anxiety at the thought of being plunged back into uncertainty. To the market’s relief, on 22 February 2022 the Corporations Amendment (Meetings and Documents) Act 2022 (Cth) (Act) received Royal Assent, and Schedule 1 of the Act established a permanent mechanism under the Corporations Act to provide for electronic execution of documents (including deeds) by Australian companies. Here is a high level summary:
| Type of document to be executed | Who can execute on behalf of a Corporations Act company | Other logistics |
| Agreement |
Directors / company secretary Section 127 of the Corporations Act permits a company to execute a document if it is signed by:
Agent or attorney A natural person acting as an agent or attorney with the company’s express or implied authority: section 126 of the Corporations Act. Evidence of their authority should be obtained as a matter of good practice. |
Hard copy or electronic form of the document can be signed. The method of signing must identify the signatory, and indicate their intention, and it must be reliable as appropriate for the purpose for which the information was recorded, in light of all the circumstances.2 Split execution of documents (where the two officers of a company sign separate copies of a document) continues to be permitted, as it was under the temporary measures. Under the new measures, however, in contrast to the temporary measures, there is no need for signatories and counterparties to exchange the “entire contents” of the document following execution. |
| Deed |
Directors / company secretary As above for agreements. Agent or attorney A natural person acting as an agent or attorney with the company’s express or implied authority: section 126 of the Corporations Act. Evidence of their authority should be obtained as a matter of good practice. Note that a natural person acting as an agent or attorney for an Australian company no longer needs to be empowered by a deed in order to execute a deed (over-turning a long standing common law rule). |
Hard copy or electronic form of the document can be signed, as above for agreements.
The permanent changes to section 126 the Corporations Act, have also expressly removed any lingering requirements for witnessing of signatures and for deeds to be on “paper, parchment or vellum” for agents or attorneys of Australian companies. This creates a consistent outcome for agents or attorneys, irrespective of the governing law of the deed, noting some State and Territory legislation requires natural persons to sign deeds “wet-ink” and/or for signatures to be witnessed. If the State or Territory provisions are inconsistent with the Corporations Act provisions, then the latter will prevail to the extent of the inconsistency (due to section 126(3) of the Corporations Act and section 109 of the Constitution). |
Ensuring that an agreement or a deed is correctly executed (1) by the right person(s); and (2) using the right process is of vital importance. Incorrectly signed documents may mean that the agreement or deed is not enforceable (or that a deed, is only enforceable as an agreement). The above is a very high level summary of the current position and we recommend seeking legal advice when in doubt. For more information, please contact the authors or a member of our team.
Footnotes
1
The Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Cth), came into effect 6 May 2020, and was subsequently repealed and replaced by analogous provisions in Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Cth), which expired 21 March 2021. The Treasury Laws Amendment (2021 Measures No.1) Act 2021 (Cth) followed in August 2021, and were slated to expire 31 March 2022. Read our previous update on this here.
2
The Act introduces new section 110A into the Corporations Act which provides for technologically neutral criteria for all signatures, irrespective of whether such signatures are wet-ink or electronic. The criteria is based on section 10 of the Electronic Transaction Act 1999 (Cth) (ETA), although clearly applies to wet-ink signatures as well.
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