Corporate electronic execution temporarily permitted

The Federal Government has made modifications to the Corporations Act 2001 (Cth) (Corporations Act) to assist businesses in navigating a new virtual environment in light of the coronavirus pandemic. 

Commencing on 6 May 2020, the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Determination) temporarily modifies the Corporations Act for a period of 6 months (expiring November 2020) to facilitate the execution of documents in the world of social distancing. 

This insight article covers the do’s and don’ts for execution of documents by companies in the coming months. For further information on the electronic execution of documents by individuals including virtual witnessing, refer to our article Witnessing now a virtual reality.

The Determination

The Determination modifies s127 of the Corporations Act to allow agreements or deeds to be in electronic form and signed electronically. 

The Determination provides that a company can execute a document without a common seal if two directors; or a director and a company secretary; or the sole director/secretary of a proprietary company either:

    • sign a copy or counterpart of the document in hard copy or; 
    • use an electronic communication which reliably identifies the person and indicates their intention as to the contents of the document.

How can you sign?

Practically, the Determination permits the following methods of execution under s127:

  1. Split execution with wet-ink: 
    • both officers wet-ink sign different copies of the same document; or
    • an officer wet-ink signs a copy of the document and then faxes/emails a PDF copy to another officer, where that officer then wet-ink signs the copy.
  1. Electronic execution: separate electronic signatures are applied to electronic versions of the document (on the condition that all persons can be reliably identified). The Explanatory Note to the Determination sets out various means by which officers can sign electronically including:
    • copying and pasting their signature into a document;
    • signing a PDF on a tablet, smartphone or laptop using a stylus or finger; or
    • using electronic software such as DocuSign. 

What’s not covered?

The changes are not retrospective. The Determination will not validate any documents which have been signed electronically under s127 prior to 6 May 2020. However, parties can ratify the execution of a document electronically in accordance with the Determination. 

The Determination (and the Corporations Act) only applies to a “company” as defined in the Corporations Act. The Determination therefore does not apply to individuals, foreign companies, statutory corporations, government and partnerships of non-companies. Deeds signed by these entities to whom s127 does not apply will still be subject to the paper and wet ink execution requirements unless state based statutory modifications apply. 

We recommend that caution should be exercised where deeds are executed to ensure that they are not subject to any paper requirements by operation of any other legislation.

Please contact our offices if you require any further guidance or assistance with electronic execution of documents.