The Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (the amending Act) came into effect on 14 August 2021 and makes transitional amendments to the Corporations Act 2001 (Cth) (the Act) to allow for electronic and split execution of documents by companies under section 127.
The Federal Treasurer implemented similar temporary amendments to facilitate electronic execution of company documents in response to the COVID-19 pandemic, which we wrote about here. Those amendments were automatically repealed on 21 March 2021 and until now were not replaced, leaving electronic execution in the lurch for the past 5 months.
The provisions in the amending Act are also temporary and will cease having effect on 31 March 2022, unless they are extended. They do not have retrospective effect.
When transacting with a company, section 127 of the Act provides statutory comfort that a company will be bound by a document where certain conditions are met (e.g. the document is signed by two directors of the company).
The amendments to the Act confirm a document will still be executed in accordance with section 127 of the Act by:
(section 127(2A) of the Act).
The amendments further clarify that:
The COVID-19 pandemic has highlighted the logistical difficulties which often arise when obtaining signatures with wet-ink from parties located in different state, or even different countries. This challenge is further exacerbated when split execution (i.e. two directors signing separate counterparts on behalf of the same company) is not allowed.
The temporary amendments will be welcomed by the business community, as the ability for companies to execute documents electronically makes it significantly easier for parties transact in the digital world. Hopefully, the amendments will be replaced with more permanent reforms, to provide ongoing certainty around execution of documents by companies.
It is very important, when executing documents electronically, to ensure the legal requirements for enforceable electronic signatures are met. This includes drafting documents to facilitate the use of electronic signatures and using two-factor authentication to identify the person signing the document.
This article was co-written by Emily Taylor.