The Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 has been introduced in Parliament to extend and expand upon existing temporary laws allowing virtual meetings and electronic signing.
Are virtual meetings and electronic signing currently permissible?
During the COVID-19 pandemic, determinations1 were made by the Treasurer to modify the operation of the Corporations Act 2001 (Cth) (Corporations Act), to:
- allow companies to hold virtual meetings (including annual general meetings (AGMs)) and provide notices of meeting electronically; and
- permit electronic signing of documents by companies under section 127(1) of the Corporations Act, as there was some divergence of opinion as to whether documents can be signed electronically.
The current determination permitting the above modifications to the Corporations Act, the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Determination), is due to expire on 21 March 2021.
What will happen after 21 March 2021?
As the Determination is due to expire soon, the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Bill) was introduced in Parliament on 17 February 2021. As at 2 March 2021, the Bill is currently with the Senate Economics Legislation Committee for inquiry and report by 12 March 2021.
If passed, the Bill will extend and expand upon the Determination allowing companies to execute documents, hold meetings, provide notices relating to meetings and keep minutes electronically, until 16 September 2021.
Electronic signing
If passed, the Bill will amend the Corporations Act to allow for the following, up to 16 September 2021:
1. Execution of documents through a combination of different methods
As the new changes are intended to be facilitative in nature, companies can continue to execute documents by wet-ink signatures. The new law also permits a combination of different methods to be used to execute a document under section 127 of the Corporations Act.2
For example, it is permissible for a director to physically sign a document and the second director or company secretary can sign electronically.
2. Electronic signing of documents
Under the proposed Bill, a director or company secretary can sign an electronic copy of a document if the following conditions are met:
- a method must be used to identify the person and indicate their intention to sign the document e.g., the Explanatory Memorandum for the Bill suggests that this can be done through a variety of methods, including DocuSign or using a stylus tool to sign a PDF document;3
- the copy includes the entire contents of the document; and
- the method used must be as reliable as appropriate for the purpose of which the document was generated or proven in fact to indicate the person’s identity and intention.
The requirements for electronic signing are largely the same as what is permissible under the Part 3 of the Determination.
3. Execution of documents in counterparts and split execution permissible
Though not included in the Determination, the Bill proposes to permit a director, secretary or witness to sign a copy or counterparty of a document, reversing the decision in Bendigo and Adelaide Bank Limited v Pickard [2019] SASC 123 where it was held that company officers are to execute a “single, static physical document”.
The copy or counterpart must include the entire contents of the document. The copy or counterpart is not required to be physically printed or have every page signed.
Split execution is also proposed to be permitted. This means that a copy or counterpart is not required to include the signature of any other person, 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 was affixed to.
4. Electronic witnessing of the fixing of a company seal
The Determination only deals with electronic execution of documents by companies without common seal under section 127(1) of the Corporations Act.
The Bill proposes to expand the existing temporary relief, by permitting a person to electronically witness a seal being affixed to a document by:
- using electronic means to observe the person fixing the seal to a document (e.g. videoconferencing);
- physically or electronically signing the document or a copy of the document; and
- annotating the document with a statement stating that they have observed the fixing of the seal by using electronic means.
5. Changes apply to deeds
The changes detailed above also apply to deeds, which means that:
- a deed can be electronically signed 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;
Under the proposed new law, companies do not need to follow the common law requirements of signing, sealing and delivering a deed.
Virtual shareholder meetings
If passed, the Bill will amend the Corporations Act to allow for the following, up to 16 September 2021:
1. Applies to directors and member meetings
The proposed rules below will apply to meetings of shareholders of companies (including AGMs), directors of companies and members of registered schemes.
2. Virtual meetings
The Bill proposes to allow meetings to be held virtually, in person at a designated location, in person at different locations connected virtually (or a combination of all), so long as persons entitled to attend, as a whole, have a reasonable opportunity to participate in the meeting, including election to exercise a right to speak and ask questions orally.
3. Place and time of virtual meetings
The Bill proposes that:
- for virtual meetings, the place of the meeting is the registered office of the company and the time of the meeting is the time at that address; and
- for hybrid meetings, where those persons entitled to attend have a choice to attend physically or virtually, the place of the meeting is the main location where the meeting is held (as set out in the notice of meeting) and the time of the meeting is the time at that address.
4. Notices for virtual and hybrid meetings
If the Bill is passed, notices of meeting for meetings held using technology must include sufficient information to allow persons entitled to attend to:
- use virtual meeting technology (i.e., dial-in details or link to meeting hosting website, and date and time of the meeting); and
- provide proxy documents by electronic means.
For hybrid meetings, the notice must also state all physical locations of the meeting and the main location of the meeting.
5. Quorum
Under the proposed changes in the Bill, all participants of a meeting (whether attending physically or by electronic means) are taken to be ‘present’ for the purposes of determining whether there is a quorum.
6. Voting at virtual and hybrid shareholder meetings
If the Bill is passed, any meeting of shareholders held using virtual meeting technology requires votes to be taken by poll, rather than a show of hands. This is a replaceable rule, and companies are free to elect another default method of voting through its constitution.
7. Tabling of documents at a virtual meeting
Under the Bill, documents can be tabled at a meeting by providing the documents to a person in advance of the meeting or making the documents accessible to persons attending the meeting in any way, including screen sharing facilities for virtual attendees and hard copies for physical attendees.
8. Documents relating to meetings
Documents relating to meetings, e.g.:
- members’ resolutions or member’s statements for consideration at a meeting;
- notices of meeting (including for directors’ meetings and shareholders’ meetings) and accompanying explanatory statements;
- notices or records of resolutions;
- notices of a statement in relation to a meeting or a matter to be considered at a meeting;
- proxy documents (e.g. to appoint a proxy, list of persons willing to act as proxy);
- questions for auditors and responses to auditor questions;
- minute books; and
- other documents relating to a meeting e.g. remuneration reports,
can be signed and given electronically, under the proposed Bill.
Under the Bill, documents can be given electronically by:
- giving the document to a person through electronic means (e.g. an email); or
- using electronic or traditional means to provide the person sufficient details to allow them to view or download the document electronically (e.g. a card or email with a link to a website),
so long as:
- the document is readily accessible so as to be useable for subsequent reference;
- the person has not opted in to receive hard copies; and
- the entity has notified the person of their right to opt in for hard copies.
It is proposed under the Bill that documents relating to a meeting or resolution can be signed electronically by using a method that identifies the signatory and indicates their intention, and must be:
- as reliable as appropriate for the purposes of the communication; and
- proven in fact to have identified the signatory and their intention (by itself or together with further evidence).
9. Opting into receiving hard copy documents relating to meetings
Under the proposed changes, a company must notify shareholders of their right to opt in to receiving hard copies relating to a meeting or a resolution considered without a meeting, either in hard copy or electronically, within 2 months of the person becoming a member. This must occur within 2 months of the day of commencement of the Bill.
Failure to notify members of their right to opt in will be strict liability offence, carrying a penalty of 30 penalty units ($6,660).
What will happen after 16 September 2021?
The Treasurer has indicated that it is proposed that electronic signing and sending of documents will be made permanent prior to expiry of the temporary arrangements detailed above. In relation to virtual meetings, the Government is planning on conducting a 12 month opt-in pilot to assess the benefits of hybrid AGMs before any permanent changes are made. This means that following 16 September 2021, shareholder meetings will need to be conducted in accordance with pre-COVID-19 laws.4
1. Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 and Corporations (Coronavirus Economic Response) Determination (No. 3) 2020.
2. Explanatory Memorandum, Treasury Laws Amendment (2021 Measures No. 1) Bill 2021, 9.
3. Explanatory Memorandum, Treasury Laws Amendment (2021 Measures No. 1) Bill 2021, 11.
4. https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/extension-measures-relating-virtual-agms-and-signing
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