On 10 February 2022 the Senate passed the Corporations Amendment (Meetings and Documents) Bill 2021 (the Bill), permanently amending the Corporations Act 2001 (the Corporations Act) to include provisions allowing for electronic execution from 23 February 2022, and virtual meetings from 1 April 2022.
Electronic signing
The COVID-19 pandemic has acted as a catalyst for change in all facets of life – and the corporate world has been no different. In the face of widespread postage delays, closed borders and mothballed planes, the ability of directors to sign contracts in wet ink and attend AGMs in person has become frustrated, and companies have increasingly relied on digital services such as DocuSign and Zoom to assist in carrying out business.
While the practice of electronic execution and virtual meetings has been widespread, due to a lack of legislative action, considerable uncertainty has shrouded whether these methods satisfy the requirements under the Corporations Act – until now!
What’s new?
- Electronic execution is now a valid form of execution, attracting the assumptions under s127 of the Corporations Act;
- Electronic meetings, tabling documents electronically, and deciding directors and shareholders resolutions by electronic poll are now valid; and
- Sole directors of companies with no secretary may now execute documents and attract the assumptions under s127 of the Corporations Act.
How may documents be signed electronically?
Individuals who are signing documents on behalf of a Company may sign the document electronically in circumstances where:
- a method is used to identify the person and indicate their intention to sign the document; and
- the method used is reliable and appropriate for the purposes which the information was recorded, or proven to have indicated the person’s identity and intention.
The Bill does not mandate the use of a specified type of technology, however, the use of digital signing platforms like DocuSign will likely be commonplace.
Can a singular document be signed both electronically and in hard copy?
Yes, one document may be signed using different execution methods.
Is split execution permissible?
Yes, separate copies of a document may be used by each party to execute the one document. For example, two directors can sign separate copies of the same document.
Virtual meetings
Upon the expiration of the current temporary measures on 1 April 2022, the Corporations Act amendments will facilitate the electronic distribution of meeting-related documents and resolutions to company members.
Companies can hold virtual meetings provided the technology used gives all persons entitled to attend the meeting reasonable opportunity to participate. All participants:
- must have a reasonable opportunity to exercise a right to speak (orally or in writing); and
- if entitled to vote, all participants must be given the opportunity to vote in real time.
These meetings can be either entirely physical, a combination of both physical and virtual (hybrid), or entirely virtual, but the meeting must be held at a time that would be considered reasonable at the determined place of meeting.
Documents may be tabled and signed during these virtual meetings by electronic means.
What companies must do now
- Companies may need to review (and amend if necessary) their existing constitutions to allow for electronic signing and virtual member’s meetings.
- Current precedent documents may need to be updated by inserting additional provisions to allow for electronic execution and to provide the necessary execution blocks for electronic signing.
If you are unsure of your obligations under these amendments and whether you, or your company is compliant with the Corporations Act, please do not hesitate to contact our team.