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Amendments to the Corporations Act bring certainty to electronic signing measures introduced under COVID, says law firm.
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Solo directors can now e-sign securely
28 April 2022
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Electronic signing measures now enshrined in law will be a boon for efficiency and convenience but may need companies to set special provisions, said one specialist law firm.
Townsend Business and Corporate Lawyers solicitor Dominique Perry said the Corporations Amendment (Meetings and Documents) Bill 2021 (Cth) (“The Bill”), amends the Corporations Act 2001 to permit companies to execute documents electronically across all jurisdictions in Australia on a permanent basis.
Ms Perry said it ensured that electronic execution will constitute compliance with sections 126, 127 and 129 of the Corporations Act 2001, which meant the protections offered by those sections will be extended to documents that have been executed electronically.
“Those protections effectively mean that a person can rely on a document as having been properly executed by a company if that execution occurs electronically,” she said.
“Previously a company with a sole director also had to appoint that director as the company secretary to enable the company to properly execute documents.
“Now companies with a sole director but without a company secretary may execute documents purely via the signature of the sole director without the need for that secretary.”
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Ms Perry said it was important to consider that the director’s signature should identify their full name and their intention to be bound by the document.
“Any document signed electronically should be subjected to protocols of safely storing the document to minimise risks of copying the signature,” she said.
“All parties are required to consider the regulations of their specific jurisdictions as opposed to what is required in the federal government’s Electronic Transactions Act 1999.”
Ms Perry said specific clauses in the Electronic Transactions Act 1999 should also be referenced stating that the parties signed electronically under the Act.
Upon receipt of digital signature documents, verification protocols might be recommended.
Ms Perry said these changes raised the issue of whether the company needed to change its constitution in order to be able to rely on the powers in the legislation.
“Generally, the constitution will set out provisions on how a company must execute a document. If there are no such provisions, the Corporations Act 2001 will apply,” she said.
“The first question to ask is therefore whether the constitution states (or has the necessary effect) that the execution method set out in the constitution is the only applicable method and no other method can be followed. If not, the Corporations Act will apply.
“If on the other hand the constitution does make that statement (or does have that effect) then it may need to be amended to allow for the electronic execution.”
Ms Perry said it was crucial for directors to review the constitution carefully. Section 110A of the new Act is phrased that electronic signing is now appropriate for execution under s127 of the Corporations Act.
“If the company’s constitution allows for the company to execute a document in accordance with section 127 then it automatically will adopt the new provisions to sign electronically without necessary amendments,” she said.
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