The Australian Government has passed changes to the Corporations Act 2001 (Cth) allowing companies the flexibility to sign documents electronically and conduct virtual company meetings.
The changes were introduced under the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth), which received royal assent on 13 August 2021 after passing both houses of Parliament.
The relevant provisions of the Amendment Act commenced on 14 August 2021. Subject to further legislation, the amendments will continue in effect until at least 1 April 2022.
In our view, the amendments are a long-awaited and much-needed practical reform to modernise the Corporations Act and align the legislation with contemporary business practices.
Execution of Documents
The amendments include changes to section 127 of the Corporations Act, which governs execution of documents, agreements and deeds by a company.
Prior to the amendments, there was no express provision in the Corporations Act to allow companies to execute documents electronically.
Instead, companies had to rely upon the Commonwealth and State and Territory Electronic Transactions Act (ETA) legislation to sign transactional documents, deeds and agreements. Usually this required the consent of all parties to a transaction.
There has also been conjecture about the validity of electronic signatures or counterpart execution of some types of documents, especially documents executed as a deed.
The amendments insert sub-sections 127(3A), (3B) and (3C), which respectively provide:
- documents may be signed by separate physical counterparts, so long as each counterpart includes the entire contents of the document. For Example: Where the document is required to be signed by 2 directors, each director may sign a separate physical copy of it.
- documents may be signed using an electronic method, such as a digital signature - so long as the electronic method is "as reliable" as a traditional method, the electronic version contains the entire contents of the document, and the method enables the signatory to be identified.
- it is not necessary for each counterpart or electronic copy to bear the signatures of all signatories to the document, or the common seal of the company (if any).
Virtual Company Meetings
Similarly, the Corporations Act did not provide a explicit option for conducting meetings via technological means (such as via videoconference, virtual meeting or streaming technology). This omission also extended to serving statutory notices of meetings and accompanying documents on the members or directors of the company.
It was up to the company's constitution to make specific allowances for the use of digital and online technologies when conducting meetings. Indeed, the constitutions of many modern companies may well contain such provisions.
The Amending Act introduces a range of changes to facilitate virtual meetings of a company's members or directors (including board committees). These provisions include:
- express provisions allowing for meetings to be held via virtual technologies, or in multiple locations [s 249R], provided that each participant in a meeting is reasonably able to participate in the meeting (such as by speaking or voting) [s 253Q];
- provisions to allow the company to serve a notice of meeting (and accompanying documents) electronically - unless the recipient has opted-out [ss 253R – 253RD];
- provisions to allow minute books and records to be kept in electronic format [s 253S];
- technical provisions to determine the "location" of the meeting if held in multiple locations or virtually [s 253QA];
Provisions Expire on 1 April 2022
The provisions introduced by the amendments expire on 1 April 2022.
Explanatory notes to the Amendment Act state that the purpose of the amendments is to provide relief during the Covid-19 pandemic. The Amendment Act replaces and earlier Treasury determination that expired in March 2021.
Despite this, the stated intention is to make the amendment provisions permanent in the legislation. With a federal election due by mid-2022, it is hoped that intent is put into effect before the government enters the pre-election "caretaker mode".
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