In a digital world, it is important that the law supports businesses to operate on a remote, and often cross-border, basis. Changes made to the Corporations Act 2001 (Cth) (the Act) in Australia earlier this year facilitate this as they make it easier for businesses to enter into contracts electronically.
Two main changes were made to the process of document execution when the Act was updated in February.
First, the law was amended to allow companies to execute documents electronically on a permanent basis, extending a temporary measure that was introduced during the Covid-19 pandemic.
Second, the changes allow sole directors of proprietary companies to execute documents on their companies’ behalf in accordance with section 127 of the Act. Previously this was only possible if the director appointed themselves as company secretary prior to signing.
These changes have simplified the signing process and have provided companies with additional methods for executing documents. Sections 126, 127 and 129 of the Act have all been amended.
More detail on execution
In addition to ‘wet ink’ signature in physical form by hand, company documents and deeds can now also be signed electronically. Electronic signing programs such as DocuSign are now an ongoing method of valid execution for companies.
Companies may execute documents in counterparts and signatories are not required to use the same method or form as another signatory. Signatures are also not required to be affixed to the entire content of a document.
More detail on proprietary companies
Sole directors of proprietary companies with no company secretary are now permitted to sign documents, including deeds, on behalf of the company in accordance with section 127 of the Act.
To align with this change, the assumptions under section 129(5) of the Act have been extended. A person may now assume that a person who has signed on behalf of a company is a director, company secretary, sole director, or both a sole director and company secretary of that company.
Additional amendments
The previous position in respect of agents was that an agent could not sign a deed on behalf of a company unless they were appointed as an attorney by the company pursuant to a deed, such as a power of attorney. Individuals executing the company’s powers would also need to have their signature witnessed.
Section 126 now provides that an individual does not need to be authorised or appointed by a deed to exercise the company’s powers, and may now duly execute a deed, whether physically or electronically, without their execution being witnessed. In practice, this means authorised agents may be appointed by a company to execute deeds on behalf of that company. The amendment overrides any contrary state and territory legislation.
These changes apply to documents executed on or after the 23 February 2022.
Co-written by Kaitlin Pert of Pinsent Masons.
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