The Australian Government is in the process of amending the Corporations Act so that companies can use technology to hold meetings, sign documents and send meeting material[1]. These amendments come from the COVID emergency legislation which was temporarily in place to enable companies to utilise technology during the pandemic.[2]
There has since been a push to make the use of technology permanent across the nation to create certainty around the validity of electronic signatures to execute and witness company documents.[3] These amendments are also intended to align with the Government’s objective to assist companies to take advantage of digital technologies to increase efficiency and reduce costs.
Technology to Hold Meetings
Under the amendments, a company (and registered scheme) will be able to hold a meeting virtually (or a hybrid meeting) if it is consented to by all the directors and, where a meeting is entirely virtual, it must be required or permitted under the company’s constitution.
The proposed amendments also deal with procedural aspects of virtual meetings such as tabling documents by screencasting. There is no limit on the type of technology which can be used to hold meetings, which was intentionally omitted to allow for emerging future technologies to be utilised by companies.[4]
It is important to note that these amendments will not apply where notice of the meeting is given to at least one person before the commencement day and the meeting is held before 16 September 2021.
Electronic Signatures
Under the new reforms, a director, secretary or witness will be able to electronically execute a document if that director, secretary or witness can:
- view the entirety of the document;
- verify the identity of the person and their intention to sign the document; and
- satisfy themselves that the method used is reliable and appropriate for the purposes for which the document was generated.
In addition to the traditional methods of executing documents under the Corporations Act, being able to use an electronic signature is hoped to streamline the execution process particularly where directors are in different States or in self-isolation. The table below outlines the different types of signatures, all of which will be permitted under the amendments and are consistent with current provisions for electronic signatures.[5]
| Type | Description | Examples |
| Wet Ink | Signing a document with a physical marking (i.e pen). This can be scanned to other parties and will still be considered a ‘wet ink’ signature. | Handwritten signature made with ink on the document. |
| Electronic | Distinct from wet ink signatures in that they leave no physical impression on the document. Any electronic communication which satisfied the characteristics of a signature (such as an e-mail signature) will be sufficient if it confirms the identity and intention to sign. |
|
| Digital | A digital signature is a form of electronic signature that incorporates a verification element (such as cryptographic authentication technology). Digital signatures provide a higher standard of assurance of the person’s identity and document confidentiality. | The use of a digital signature requires the person to have access to a specialised platform or software. |
| Counterpart signing | Counterpart signing enables directors to sign a separate copy of the document which is then circulated to all parties and collated into one complete document. | Most agreements (and deeds) include a clause stating that the document can be executed by counterpart. It is best practice to ensure this clause is included in the document if counterpart signing is to be relied upon.[6] |
People dealing with companies will be entitled to assume that a document is validly executed if these new rules are followed. This replicates the assumptions people are entitled to make in relation to the traditional methods of executing a company document under the Corporations Act.
Another significant change to the legislation is that a document will be able to be executed by a sole director of a proprietary company that does not have a company secretary. Prior to this amendment, it was considered that this section did not deal appropriately with companies that had a sole director but no secretary.
Temporary legislation
While the permanent amendments are coming into effect, the government at both the Federal and State and Territory levels have put in place temporary legislation to enable companies to continue to execute documents electronically. At the Federal level the temporary legislation will expire on 31 March 2022.[7] It is important when relying on temporary emergency legislation to execute documents to be cognisant of which State legislation applies and whether it has (or is nearly) expired.
What this means for you and your company
As the amendments only relate to the provisions of the Corporations Act dealing with a company executing documents, they will not apply to people signing documents in their individual capacity.
When relying on the upcoming amendments, or in the interim relying on temporary emergency legislation, it is important to consider the following:
- whether the company constitution allows for entirely virtual meetings;
- whether the company shareholder agreements are consistent with the company constitution in relation to the use of technology;
- how the new provisions will be adhered to such as ensuring all persons are afforded a reasonable opportunity to participate (both virtually and in person); and
- what State or Federal legislation is being relied upon and whether it has, or is about to, expire.
The commercial team at Mahoneys can assist with the above to ensure that the legislation is adhered to properly to ensure the proper execution of all company documents. We can also assist with reviewing and amending the company constitution and shareholder agreements to make certain that they comply with the legislation.
If you would like further information as to how these changes may affect you and whether the company’s constitution is compliant, please contact Mahoneys commercial Partner, Antony Harrison, or Lawyer, Sabrina Austin on (07) 3007 3777 or aharrison@mahoneys.com.au or saustin@mahoneys.com.au.
[1] Treasury Laws Amendment (Measures for Consultation) Bill 2021: Use of technology for meetings and related amendments.
[2] Corporations (Coronavirus Economic Response) Determination (No. 3) 2020.
[3] Treasure Laws Amendment (Measures for a Later Sitting) Bill 2021: Use of Technology for Meetings and Related Amendments, Exposure Draft Explanatory Materials.
[4] Treasure Laws Amendment (Measures for a Later Sitting) Bill 2021: Use of Technology for Meetings and Related Amendments, Exposure Draft Explanatory Materials, para 1.17.
[5] Electronic Transactions Act 1999 (Cth) s 10.
[6] Australia Government Solicitor, Fact sheet 38: Execution solutions for remote working arrangements (20 April 2021) https://www.ags.gov.au/sites/default/files/2021-04/Fact%20sheet%20No%2038%20April%202021.pdf.
[7] Treasury Laws Amendment (2021 Measures No. 1) Act 2021. Originally, the amendments in Schedule 1 of the Treasury Laws Amendment (2021 Measure No. 1) Bill 2021 were intended to remain in force until 16 September 2021 however the Act extends until 1 April 2022.
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