Although widely used in Australian commercial transactions, there is uncertainty around how deeds should be executed by foreign companies.
A deed is generally required for commercial transactions and certain other situations that do not involve consideration, in contrast to a contract. In order for a deed to be executed correctly, it must be in writing, have a seal on the document and be delivered to the other party.
Generally Australian companies execute deeds under section 127 of the Corporations Act 2001 (Cth) (the Act) which provides that a corporation may execute a document, including a deed, without using a common seal. To fall within section 127, the document/deed must be signed by:
(a) 2 directors of the company; (b) a director and a company secretary of the company; or (c) for a proprietary company that has a sole director who is the sole company secretary – that director.
The Act includes provisions that permit a person to assume that the execution is valid, if it is executed in the above manner.
Australian and Foreign Individuals as counter-parties
Individuals who are a party to a deed are required to have their signature witnessed in all states and territories, other than Victoria. Although a witness is not strictly required for individuals signing a deed within Victoria, it is recommended that the requirement not be removed from an evidentiary perspective.
Procedural Uncertainty – Deeds Executed by Foreign Corporations
There is uncertainty in the legal and business communities about how a foreign corporation should execute a deed so as to be enforceable under Australian law. Further ambiguity arises if the corporation is from a jurisdiction that does not recognise the concept of a deed. Some examples of jurisdictions that do not recognise a difference between a contract and a deed are the United States, Japan and China.
There is no specific Australian legislation that governs how foreign entities should execute documents or deeds. The common industry approach is that a foreign corporation should sign in accordance with their own domestic laws and, if there is any concern regarding whether the corporation has complied with their domestic laws, it may be prudent to obtain independent legal advice from foreign counsel to confirm that the execution of the deed is valid. Further, while the words “signed, sealed and delivered” may take effect as a seal, the prudent course is for the foreign corporation to include a seal mark in order to ensure that the deed complies with Australian legal requirements. If the foreign corporation does not have an existing company seal, a printed circle with the word “LS” or “seal” can be used instead.
As an alternative to the foreign company executing the deed directly, the foreign company can have an individual execute the deed on its behalf under a power of attorney. Where an attorney executes a deed on behalf of a corporation, you should take steps to be satisfied that the attorney has been validly appointed and can bind the corporation (potentially including by obtaining independent legal advice from foreign counsel regarding the validity and limitations of the appointment).
