As the growth of the Metaverse and Web 3.0 continues to influence how we live and work today, and our expectations for tomorrow, the impact of digital disruption extends to the corporate business world. The global health pandemic brought into bold relief long-standing challenges with laws relating to electronic execution of documents, and temporary changes were introduced at the height of the pandemic to amend the Corporations Act to address ambiguities about their legal validity. With effect from 1 April 2022, the Corporations Amendment (Meetings and Documents) Act 2022 (Cth) made these temporary changes permanent. In this article, we discuss the recent changes to e-signing under the Corporations Act, and the current position under state and territory law.
To understand what electronic communications and e-signatures are, see Are e-signatures valid under Australian Law? See also our previous article The Return of E-Signatures: Updates to the Corporations Act under the 2021 COVID-19 lockdowns.
Each Australian State and Territory has particular rules pertaining to the e-signing of documents in their respective jurisdictions. However, a document executed by an Australian company in accordance with the Corporations Act is deemed to be validly executed in all States and Territories.
A company could rely on the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth) (Treasury Laws Amendment Act) to execute deeds and agreements electronically, however, the Treasury Laws Amendment Act expired on 31 March 2022.
On 22 February 2022, the Corporations Amendment (Meetings and Documents) Act 2022 (Cth) (Corporations Amendment Act) received Royal Assent. The Corporations Amendment Act commenced on 1 April 2022 and made permanent the temporary reforms in the Treasury Laws Amendment Act. It establishes a permanent mechanism to allow companies and registered schemes to use technology to execute, sign and share company and meeting related documents.
The changes introduced by the Corporations Amendment Act gives companies the option of e-signing certain documents and removes ambiguity around the process. In particular, amending Schedule 1 (Division 1 of Part 1.2AA) so that it set out the requirements for how company documents (including deeds) and meeting related documents can be validly executed in a ‘technology neutral manner’.
Section 110A of the Corporations Amendment Act applies to documents signed pursuant to sections 126 and 127 of the Corporations Act. The Corporations Amendment Act amends the previous requirements of sections 126 and 127 to clarify that documents may be validly executed in accordance with the changes introduced by Division 1 of Part 1.2AA.
In addition to the Corporations Amendment Act permitting a company to sign a document electronically, all State and Territory laws expressly permit electronic execution of agreements by companies. In addition, NSW, Victoria, Queensland and the ACT permit electronic execution of deeds. For an overview of the status of electronic execution in each state and territory, see the table below.
Each The federal Electronic Transactions Act 1999 (Cth) (Commonwealth ETA) permits an individual to sign a document electronically. As discussed below, in addition, certain State and Territory laws expressly permit electronic execution of documents by individuals.
The Corporations Amendment Act has made permanent the temporary reforms in the Treasury Laws Amendment Act, to allow companies and registered schemes to use technology to execute, sign and share company and meeting related documents.
Additionally, agreements can be e-signed by companies in every State and Territory of Australia but not every State and Territory provides for e-signing of deeds by companies or individuals.
The Treasury Laws Amendment (Modernising Business Communications) Bill 2022 (Cth) (Treasury Laws Amendment Act) lapsed on 11 April 2022 with the calling of the federal election by the Prime Minister. Many hope that, following the election, Parliament will introduce a new bill that similarly aims to provide flexibility through the use of electronic communications between businesses, individuals and regulators when sending documents required under various legislation.
If you require corporate legal advice with respect to the the effective execution of legal documents in the age of the Metaverse, or on other corporate or commercial matters, please contact us below.