Electronic signing by companies temporarily permitted once again

7 months after being introduced in Parliament, the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth) (Amendment Act) has become law1, permitting electronic signing by companies under section 127 of the Corporations Act 2001 (Cth) (Corporations Act) until 31 March 2022.

This is a welcome development, as electronic signing has not been expressly permitted under the Corporations Act since March 2021.2

Provisions in place until 31 March 2022

Changes to the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 were made after it was first introduced into Parliament in February 2021. Importantly, the provisions temporarily permitting electronic signing (as discussed below) will be in force until 31 March 2022 (instead of September 2021, as contemplated in the initial provisions of the Bill).

(a) Electronic signing of documents by companies

Companies can now execute documents under section 127 of the Corporations Act3 by electronic means if:

  • the electronic method used identifies the person signing and indicates their intention to sign the document (e.g. the Explanatory Memorandum states this can be done in a variety of methods, including DocuSign or using a stylus tool to sign a PDF document and then emailing the document);
  • the electronic copy includes the entire contents of the document; and
  • the method used is as reliable as appropriate for the purpose for which the document was generated, or proven in fact to indicate the person’s identity and intention.

(b) Split execution permissible

The new provisions permit companies to use a combination of different methods when executing a document. For example, one director may physically sign a paper version of the document while a second director may sign the document using electronic means. Split execution is also expressly permitted, i.e.:

  • for documents executed by two directors or a director and company secretary, the two persons do not have to sign the same document; and
  • for documents executed by a company by affixing a company seal, the witness does not need to sign the same document as the one the seal is affixed to.

However, any copy or counterpart of a document signed, or to which a company seal has been affixed, must include the entire contents of the document, and not just the signature page.

A company may also continue to execute documents in the traditional manner by applying wet signatures to a physical paper document.

(c) Applies to deeds

The new law on electronic execution applies to all documents including deeds, which means that under section 127 of the Corporations Act, as amended:

  • a deed can be electronically executed by a company without common seal;
  • a person can electronically witness a seal being affixed to a deed; and
  • deeds can be executed in counterparts, and with split execution.

The Amendment Act adds a note to the end of section 127(3) of the Corporations Act, confirming that where a company executes a deed by following the process outlined in section 127 of the Corporations Act, they are taken to have signed the deed. The Explanatory Memorandum of the Amendment Act clarifies that this means companies do not need to follow the established common law requirements of signing, sealing and delivering a deed, if the deed is executed following the process under section 127 of the Corporations Act.

Where a deed is not executed by a company under section 127 of the Corporations Act, the signing and witnessing requirements under the legislation of each State and Territory will apply. Due to the COVID-19 pandemic and associated restrictions, some States/Territories have enacted temporary legislation permitting electronic signing and witnessing.

What other changes are there?

What happens after 31 March 2022?

The Treasurer has released an exposure draft of a bill that will permanently change the Corporations Act to permit electronic signing of documents by companies. It is expected that the bill will be considered by the Australian Parliament later in 20214.

1 The Treasury Laws Amendment (2021 Measures No. 1) Act 2021 was assented on 13 August 2021.
2 Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 and Corporations (Coronavirus Economic Response) Determination (No. 3) 2020.
3 That is, by 2 directors, one director and company secretary, or by the sole director and company secretary.
4 https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/extending-relief-virtual-meetings-and-electronic

Liability limited by a scheme approved under Professional Standards Legislation.
© ADDISONS. No part of this document may in any form or by any means be reproduced, stored in a retrieval system or transmitted without prior written consent. This document is for general information only and cannot be relied upon as legal advice.