Electronic signing – What’s changed and what you need to know

Mar 2022 | Energy & Resources

Temporary changes to the Corporations Act 2001 (Cth) (Corporations Act) facilitating electronic execution of documents, which were originally introduced as a temporary COVID measure in 2020, have now been made permanent.

Following the passage of the Corporations Amendment (Meetings and Documents) Act 2022 (Cth), the new rules allow companies to execute contracts, deeds, meetings-related and company documents electronically. They also permit companies to hold hybrid meetings (as of right) or wholly virtual meetings (if a company constitution permits it).

It is envisaged that the shift to ‘technology neutral’ laws will allow companies to conduct business more efficiently and cost effectively, whilst maintaining a sufficient level of security for identifying the signatory and confirming their intent to be bound by the document.

Summary

Companies can continue to use electronic or digital execution after temporary measures introduced in response to the Covid-19 pandemic became permanent.
Deeds may now be electronically signed by companies.¹
Companies may wish to review internal corporate governance mechanisms regarding who has authority to sign for the company and update any contract precedents to ensure the requirements for electronic signing are met.
For the execution of deeds by individuals, the position will depend on the jurisdiction.

What changes occurred as a result of the COVID-19 pandemic?

The COVID-19 global pandemic brought with it the dawning realisation that the position regarding in-person signatures of legal documents in Australia needed to change.

New South Wales² and Victoria³ took the lead in implementing provisions for electronic execution in April 2020. Later that month, Queensland also followed suit with its Justice Legislation (COVID-19 Emergency Response – Wills and Enduring Documents Amendment Regulation 2020,⁴ which allowed for:

deeds to be made or signed electronically, without a witness and without needing to be sealed (or deemed sealed);
electronic general powers of attorney;
certain mortgages to be created electronically and registered; and
electronic signing and remote witnessing of statutory declarations, affidavits, wills and enduring powers of attorney.

At the end of last year, Queensland introduced permanent legislation which:

allows powers of attorney for businesses (except for sole traders), to be signed electronically, in counterparts or by split execution and without a witness;
allows for electronic deeds which can be signed electronically using an ‘accepted method’;⁵
removes the requirement that deeds be ‘sealed’ or stated that they are ‘sealed’, but requires the deed to expressly state that it is executed as a deed;
removes the requirement for witnessing of an individual’s signature;
provides a way for deeds to be executed by foreign and statutory corporations; and
removes the requirement that an agent had to be appointed by deed in order to sign a deed.⁶

New South Wales also introduced the Customer Service Legislation Amendment Act 2021 (NSW) which amended s 38A of the Conveyancing Act 1919 (NSW) to allow for electronic execution of deeds by corporations (in addition to individuals). New South Wales also permanently enabled remote witnessing of documents through the Electronic Transactions Amendment (Remote Witnessing) Act 2021 (NSW).

Companies signing under the Corporations Act

The new rules regarding ‘technology neutral’ execution apply to documents (including deeds) signed by or on behalf of a company pursuant to s 126 and s 127 of the Corporations Act, documents which relate to meetings or resolutions and any other documents specified by regulation.

‘Technology neutral’ is a reference to the fact the new rules do not mandate the use of any particular type of technology, allowing flexibility in the manner by which technology is used to sign documents. To this end, using platforms like DocuSign and Adobe Sign, signing a document on a tablet with a stylus or tracing a signature with a finger, may be a reliable and appropriate method for executing a document, provided it accords with the purpose for recording the information in light of all surrounding circumstances.

A person may sign documents by signing a physical or an electronic form of the document and can now sign separate copies of the same document via a ‘split’ execution method.⁷

Deeds

In what represents a big shift in common law as it relates to deeds, agents can now sign deeds on behalf of companies. Previously, agents could only sign agreements on behalf of a company. Proper execution of deeds required companies to follow the formal execution requirements (execution by s 127 of the Corporations Act), unless there was a power of attorney in place which allowed an agent to sign on behalf of the company.

The new rules allow agents to sign deeds without having been appointed by deed (such as a power of attorney). Signatures also are not required to be witnessed in order to be valid.

If a person is held out to be an agent of a company, a person may assume that the agent has been duly appointed.⁸However, in order for parties to rely on the statutory assumption that a document has been duly executed by the company, documents will still need to be signed in accordance with s 127(1) – that is, by two directors, a director and secretary or, in the case of sole director companies, that director.

Sole director companies

Sole director companies can also now sign documents by electronic means. Until now, proprietary companies with a sole director and no company secretary could not use the statutory document execution mechanism in s 127 of the Corporations Act. Now, a document will be validly executed by a sole director company if the sole director signs the document, or they witness the fixing of the company’s common seal to the document. No witness is required.

Meetings

In addition to the new signing rules, the amendments to the Corporations Act have made permanent previously temporary rules which allow companies to give meetings-related documents electronically. Meetings-related documents include notices of meetings, resolutions and minutes. Companies can now send documents in physical form, send meetings-related documents by email, or by providing links to a website to view or download documents. However, companies will still need to take care to ensure that communication is delivered to shareholders and members in the manner in which they elect, which may be paper-based or electronic. Penalties may apply if documents are not provided in the requested format.

Meetings may be held in person, hybrid (i.e., a combination of one or more physical meetings and virtually) or, if a company’s constitution allows, wholly virtual. Persons attending virtually are taken to be present at the meeting and counted for the purposes of establishing quorum. For the purposes of determining the place and time of meeting, physical and hybrid meetings will be taken to be conducted at the location and time of the physical meeting. Virtual meetings will be taken to be held at the registered office of the company.

Voting on resolutions must be decided by a poll. This represents a departure from pre-pandemic practices, where votes were usually by a show of hands unless the company constitution allowed otherwise. As meetings moved online, polls have been used with success, which has led to a shift towards their mandatory use in meeting votes.

Practical steps for companies

Companies may wish to review their internal corporate governance mechanisms to ensure that documents are only signed when a company intends to be bound by the document. Consider whether policies regarding delegation of authority to sign contracts and deeds should be introduced or updated.

Companies wishing to sign electronically should also look to update any contract precedents to contemplate electronic signing and ensure the requirements of s 127(3B) of the Corporations Act 2001 (Cth) are met.

Companies wanting to hold exclusively virtual meetings will need to amend their constitution to allow for this.

What about electronic execution by individuals?

The rules pertaining to electronic execution by individuals will depend on the jurisdiction. Queensland, New South Wales and Victoria all introduced temporary measures in response to Covid which allowed for electronic or digital execution by individuals. Some of these measures have become permanent, but there are some important exceptions.

Documents that can be signed electronically include: memorandums of understanding, work orders and similar; land documents requiring registration where it is permitted through an Electronic Lodgement Network such as PEXA; contracts; affidavits; statutory declarations; oaths and affirmations (except oaths of office and oaths of allegiance); deeds and mortgages; powers of attorney for businesses; and powers of attorney for individuals where it is part of a commercial or other arms-lengths transaction and is given for such purpose.

For the execution of deeds by individuals, the position will depend on the jurisdiction:

In Queensland, on and from 30 April 2022, deeds may be in electronic form and electronically signed by an individual or by an agent of the individual, without a witness.⁹
In New South Wales, deeds may be in electronic form and electronically signed, and witnessing may occur via audio-visual link.¹⁰
In Victoria, deeds are now considered transactions which allows for electronic execution and witnessing via audio-visual link.¹¹
Outside Queensland, New South Wales and Victoria, individuals should consider the split execution method – the deed will be printed, physically signed in the presence of a witness, scanned and sent to the counterparty for their execution.

Documents that cannot be signed electronically include:

land documents that are not permitted through an Electronic Lodgment Network;
deeds signed by individuals in jurisdictions outside Queensland, New South Wales and Victoria;
documents requiring a witness in Western Australia, South Australia and Northern Territory (which require the witness to be physically proximate ‘at a distance’); and
powers of attorney for individuals (where it is not part of a commercial arrangement and given for the purpose of such an arrangement).

¹ Corporations Amendment (Meetings and Documents) Act 2022 (Cth).
² Electronic Transactions Amendment (COVID-19 Witnessing of Document) Regulation 2020 (NSW).
³ COVID 19 Omnibus (Emergency Measures) Act 2020 (Vic).
⁴ Note that the name of this Regulation was changed a few days after it was made to the Justice Legislation (COVID-19 Emergency Response—Documents and Oaths) Regulation 2020 (Qld).
⁵ An ‘accepted method’ is one which identifies the signatory and the signatory’s intention in relation to the contents of the document, is reliable and appropriate for the purposes of the document and is consented to by all signatories to the document (see, e.g., s 44 of the Property Law Act 1974 (Qld)).
⁶ Justice and Other Legislation Amendment Act 2021 (Qld).
⁷ Previously, this was considered an issue. See Bendigo and Adelaide Bank Ltd & Ors v Kenneth Ross Pickard & Anor [2019] SASC 123.
⁸ Corporations Act 2001 (Cth) s129(3).
⁹ This is because s 51 of the Justice and Other Legislation Amendment Act 2021 (Qld) will commence, resulting in the replacement of the current provisions and insertion of new ss 46D and 46E into the Property Law Act 1974 (Qld).
¹⁰ Conveyancing Act 1919 (NSW) s 38A.
¹¹ Justice Legislation Amendment (System Enhancements and Other Matters) Act 2021 (Vic).

This article may provide CPD/CLE/CIP points through your relevant industry organisation.

The material contained in this publication is in the nature of general comment only, and neither purports nor is intended to be advice on any particular matter. No reader should act on the basis of any matter contained in this publication without considering, and if necessary, taking appropriate professional advice upon their own particular circumstances.

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