Following overwhelming support from industry representatives, the Federal Government has released exposure draft legislation proposing to permanently extend the statutory mechanism for companies to execute documents to include electronic execution (amongst other things, outlined below).1

Key proposals

If the exposure draft is passed in its current form, any person dealing with an Australian company will be entitled to assume that a document (including formal agreements and deeds) has been validly executed by that company if the document is:

  • signed electronically by the company’s directors, company secretaries and witnesses (if applicable), provided the method of signing is a reliable method of execution or can in fact prove the signor’s identity and intention to sign (amongst other formal requirements);
  • executed by company seal and the fixation of the seal is witnessed remotely, whether by using technology to observe the fixing (e.g. videoconferencing) or electronically signing or annotating the document to confirm that witnessing took place electronically; or
  • signed and witnessed (if applicable) using one of the existing, traditional methods of executing a company document (i.e. ink and paper).

Further, under the exposure draft legislation (if passed):

  • split execution will become permissible, meaning directors and company secretaries of the same company may sign different counterparts of a document;
  • sole directors who have signed a document on behalf of a company will be assumed to duly executed that document, notwithstanding no company secretary has been appointed; and
  • companies and registered schemes will have the option of:
    • holding hybrid general meetings (i.e. a physical meeting which can be attended virtually by technology), as well as wholly-virtual meetings but only if this is expressly required or permitted by the company/scheme constitution; and
    • signing and dispatching documents relating to meetings by electronic means, regardless of whether the meeting is virtual, physical or a hybrid of the two.

The way forward

The exposure draft legislation aims to bring certainty for counterparties in transacting with Australian companies, and set expectations as to the internal corporate governance mechanisms that companies should have to ensure that document execution only occurs when companies intend to be bound by legal rights and obligations.

The Government is inviting comment on the exposure draft legislation until 16 July 2021. Until such time as the legislation is finalised and passed by Parliament, you are welcome to download the ‘Addisons’ Guide to Electronic Execution of Documents‘ if you have any questions about how you, your company or partnership, or any counterparty, should be signing documents.