ELECTRONIC EXECUTION – THE NEW NORMAL.
Published on Nov 10, 2021 by Charmian Holmes and Nicholas Pavouris
Gone are the days when signing documents needs to be done with a pen and paper and a witness by your side. Finally the Australian Government has introduced new laws that will allow companies to sign documents by electronic means. However, the laws are still temporary until the end of March 2022, with laws to make those changes permanent expected later this year.
These changes are designed to extend the temporary relief that was granted by the Government and ASIC during the height of the COVID-19 pandemic by allowing digital execution and virtual AGMs.
What are the new rules?
These new changes mean that directors are able to execute agreements and deeds by either using physical paper or by digital means, by wet signature or by electronic signature. This allows for the rapid adoption of digital signature software (such as DocuSign, PandaDoc and Adobe Sign) and allows for flexibility for all companies on how to sign.
For directors signing by digital means you must ensure that:
- A person is identified and intends to sign the document;
- The document being signed contains the entire contents of the agreement; and
- A reliable method is being used to sign the document.
Most existing digital execution platforms already comply with the above three requirements. However if you will not be using a digital execution platform you must address the identification and intention requirements if you are using some other electronic execution method. We would recommend that when digitally executing by copying and pasting or inserting an electronic signature or signature image, that directors take extra caution and when exchanging contracts they include a clear declaration of an intention to sign the document electronically.
Using digital execution as your preferred method of execution has other benefits as it also eliminates unnecessary costs associated with having officers of a company sign in person together or having original hard-copy documents posted or exchanged physically by the parties.
If you use digital execution when signing legal agreements, you should still include a statement that you have signed in accordance with the requirements under section 127 in the execution block within the document.
What won’t be covered by the changes?
The changes for digital execution apply where you want to sign in accordance with section 127 of the Corporations Act and rely on the presumptions made under section 129 of the Corporations Act. For example, the presumption that a person is validly authorised to execute the document and it is legally binding because the person is a current officer of the company.
It is still possible to validly execute a document without relying on those presumptions. For example where the person signing is an individual who has authority to sign on behalf of the company (i.e. a duly authorised signatory) or where the company is executing using an attorney (pursuant to a power of attorney).
There are a lot of companies that due to their size have a number of agents or attorneys that are appointed to execute documents on behalf of the company. In these cases, these individuals are not signing under section 127. This means that they do not follow the execution requirements under the Corporations Act.
Agents and attorneys are signing in accordance with the requirements of the relevant state or territory that the agreement is governed by. For example, in NSW there is already the ability to use digital execution under the NSW Electronic Transaction Act. This legislation permits digital execution of both agreements and deeds and also has temporary relief for documents to be witnessed by audio-visual means. This gives some flexibility to businesses who are using their authorised signatories, attorneys or agents sign documents for the company.
We expect that other state/territory jurisdictions will want to afford companies the ability to execute digitally and are likely to extend their COVID-19 related relief to more permanent arrangements. We have outlined what the current framework is at state level.
|State/Territory||Pre-COVID requirement||Current Arrangement|
|New South Wales||Physical or electronic creation of documents, signing and witnesses in person.||Documents can be witnessed by audio visual means until 31 December 2021 (temporary solution).|
|Victoria||Physical creation of document and signing but no witnessing requirements in person.||Electronic creation and signing of documents and audio visual witnessing (permanent solution).|
|Queensland||Physical creation of document, signing and witnessing requirements in person.||Electronic creation and signing. Removal of witnessing requirements (in certain circumstances until 30 April 2022) (temporary solution).|
|Western Australia||Physical creation of document, signing and witnessing in person.||No changes.|
|South Australia||Physical creation of document, signing and witnessing in person.||No changes.|
|Tasmania||Physical creation of document, signing and witnessing in person.||No changes.|
|Australian Capital Territory||Physical creation of document, signing and witnessing in person.||Physical creation, signing but audio-visual link witnessing until end of COVID-19 emergency (temporary solution).|
|Northern Territory||Physical creation of document, signing and witnessing in person.||No changes.|
We’re happy to help with updating any of agreements with the declarations and affirmations required for digital execution and witnessing where this is available to you. Please contact us if we can help.