Electronic execution of documents under the Corporations Act reinstated - Contracts and Commercial Law

After months of uncertainty following the lapse of the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Cth) on 21 March 2021, legislation has now been passed to reinstate the previous COVID-19 relief allowing for electronic execution of documents under section 127 of the Corporations Act 2001 (Cth) (Corporations Act). The return of the relief will be welcomed by many as we wait for this temporary measure to be made permanent, potentially later this year.

Background

The details of the relief are set out in the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (the Act), which was passed by both houses of the parliament on 10 August 2021 and received Royal Assent on 13 August 2021. The Act amends section 127 of the Corporations Act to permit:

split execution – i.e. allowing for two directors (or one director and company secretary) to sign documents separately in counterparts who, without the relief, would have been required to sign the same physical copy; and
use of technology neutral methods in executing documents including by way of electronic signatures.

In relation to split execution, it is important to note that each counterpart must contain the entire contents of the document. This is to ensure that all parties to the document are signing on the same terms, but it does not mean that the parties need to print or sign every page of the document.

In relation to the method of executing, while the Act does not mandate the use of any particular technology, the method chosen must sufficiently identify the person signing the document and indicate their intention to sign. The method must also be:

as reliable as appropriate for the purpose for which the document was generated or communicated; or
proven in fact to have indicated the person's identity and intention to sign.

Comment

For methods of executing documents electronically, we previously have and continue to recommend using an electronic platform such as DocuSign given it is able to satisfy all elements of identification, intention and reliability. Properly set up, these electronic platforms are easy to use, provide clear execution and will generally be accepted by the courts.

Of course, under the new rules, the methods by which a company may execute its documents are not restricted; provided the company observes the aforementioned requirements.

The relief granted under the Act is set to expire on 1 April 2022, but the government has foreshadowed that it will introduce more permanent changes later this year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.