Introduction

In March 2020, the Federal Government introduced a series of temporary reforms to enable businesses to operate virtually during the pandemic. The changes included provisions allowing virtual AGMs, electronic execution, delayed financial reporting and ASX relief for annual listing fees, which we reported in our article on Corporate Reform in the Age of COVID-19. These changes expired on 21 March 2021 and the laws reverted to their original position before the pandemic.

In response to Australia’s ongoing lockdowns, the Corporations Act 2001 (Cth) (‘Act’) has been further amended by the Treasury Laws Amendment (2021 Measures No.1) Act 2021 (Cth) (‘Amendment Act)’. The Amendment Act came into effect on 14 August this year and reinstates many of the original reforms. The temporary reforms do not apply retrospectively, meaning companies cannot rely on the amendments to validate corporate actions in the period from 21 March to 14 August 2021.

These amendments are set to expire on 1 April 2022. However, the Federal Government has indicated it will enact permanent reforms allowing electronic and split execution under section 127 of the Act prior to this date.

Overview

The new, temporary reforms enable corporations to:

• electronically execute agreements and deeds;
• execute agreements by signing a counterpart;
• hold virtual meetings; and
• deliver notices of meeting via electronic means.

These changes are intended to assist companies struggling to carry out their usual business practices under the lockdown. These changes broadly reflect those made last year, which have since expired.

The new amendments are due to automatically expire on 1 April 2022. However, the Federal Government has stated that it intends to enact permanent reforms allowing electronic and split execution under section 127 of the Act before the temporary reforms lapse.

What changes have been made?

1.   Electronic and Split Execution 

Electronic Execution

Once again, companies can electronically execute documents under section 127 of the Act provided that the following 3 requirements are met:

1. A method is used to identify the person signing and that method indicates the person’s intention to sign a copy or counterpart;
2. The copy or counterpart signed includes the entire contents of the document section; and
3. The method of execution used is reliable for the purposes (or is proven in fact to have fulfilled the purpose for which the document was generated).

These requirements extend to all documents that can be executed under section 127, including deeds. They are satisfied using the following process:

1. The whole document must be sent to the signatories for review. Providing a single execution page to the signatory that has been extracted from the document will not meet the section 127 requirements.
2. An electronic execution method is used where the signatory applies their signature directly to a copy or counterpart of the document. This can be done by using electronic signature software such as Adobe Sign or DocuSign, copying and pasting the signature onto the document, or using a digital pen to write the signature.
3. The signatory’s name is inserted alongside the digital signature or the signed document is returned with a covering letter that recognises the electronic execution and acknowledges the signatory’s intention to be bound.

‘Split’ Execution

The Act also permits ‘split execution’ in place of the traditional requirement that each signatory must sign a single, physical document. Companies are therefore allowed to bind themselves by having two signatories sign two different copies or counterparts of the same document. These copies can be digital, physical or a combination of both.

2.   Notices of Meeting and Virtual Meetings

Virtual Meetings

The amendments allow meetings of directors and shareholders of companies, and members of registered schemes, to be held virtually. Meetings may be held as a hybrid in-person and virtual meeting, or as a wholly virtual meeting. This is a particularly critical reform in light of the impending 2021 AGM season.

The technology used to carry out the virtual meeting must provide attendees with a reasonable opportunity to participate in the meeting without being physically present. Video conferencing platforms such as Zoom, Skype and Microsoft Teams would meet this requirement.

This provision applies regardless of whether virtual meetings are provided for in a company’s constitution. However, if a company wishes to continue holding virtual meetings after the sunset date on 1 April 2022, it is advisable to amend the Constitution accordingly.

Documents Related to Meetings

Companies may now electronically sign and issue any document that relates to a meeting, including notices of meeting, notices of resolution, proxy documents, minute books and members’ resolutions.

These documents can be issued electronically, or by sending mail that contains information of where to access the documents. The Amendment Act also allows these documents to be recorded and stored electronically, as long as they are accessible for later reference.

If a member still wishes to receive physical copies of meeting-related documents, they can request this from the company.

Concluding Remarks  

The Amendment Act provides a number of reforms to the Corporations Act in response to the second wave of COVID-19 lockdowns in Australia. These changes provide greater flexibility for companies during these challenging times for business. If you require corporate legal advice with respect to the temporary reforms or more generally, please contact us below. We can quickly assess your situation and make immediate and cost-effective recommendations.