Socially distant execution of company documents

Mandatory social distancing and working from home requirements introduced due to the coronavirus pandemic has posed a challenge to business operations and driven adoption of technology to empower a remote workforce at an unprecedented scale. Electronic transactions are no exception to this. In Australia the government has taken steps to provide certainty to Australian companies looking to execute and exchange documents electronically.

While electronic transactions are nothing new in Australia, the law has not always kept up with business practice.  Since 1999 Australia has had the Electronic Transactions Act 1999 (Cth) (Electronic Transactions Act) (each state and territory also has its own legislation which largely mirrors the federal legislation) which facilitates exchange of documents by electronic communication such as email and the use e-signatures.

However, section 127 of the Corporations Act 2001 (Cth) (Corporations Act) which prescribes formalities for the execution of documents by Australian companies is expressly excluded from the application of the Electronic Transactions Act. As a result, it remained unclear whether an e-signature and soft copy counterparts could satisfy the requirements of section 127.  It also threw into question whether parties to a document could assume that is was duly executed if signed or exchanged electronically.

In response to the difficulties faced by companies complying with stay at home directions the Australian government issued the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Determination) on 5 May 2020. The Determination amends the Corporations Act to expressly permit Australian companies to rely on the execution of documents by two directors or a director and company secretary (including where one person occupies both offices) via an electronic communication that identifies the person in the electronic communication and indicates their intention in respect of the contents of the document.

This Determination means that companies can now confidently execute documents in their preferred manned whether it be by pasting a copy of a signature into a document, signing a PDF on a smartphone or through a cloud-based signature platform such as DocuSign. Each signatory may electronically execute different digital counterparts which together will constitute one validly executed document.

Unfortunately these measures are only temporary and set to expire on 6 November 2020. Hopefully there are more permanent changes to the legislation to come in the future.