Taking effect from 6 May 2020, the operation of section 127(1) of the Corporations Act 2001 (Cth) has been modified by the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 to temporarily allow electronic execution of documents by companies for the next 6 months after the effective date.
The category of persons who may execute a document on behalf of a company without a seal (and benefit from the statutory assumption that the document has been duly executed by the company) remains unchanged. To recap, a document may be executed:
- by 2 directors of the company
- by a director and a company secretary of the company
- for a proprietary company that has a sole director who is also the sole company secretary, that director.
With the recent amendments, however, the definition of ‘document’ has been extended to include a document in electronic form. This would include common document formats such as Microsoft Word documents and PDFs.
As a result, a document in electronic form (e.g. a PDF) can be executed by a company without a common seal by each person:
- signing a copy or counterpart of the document that is in a physical form (i.e. a print-out of the PDF)
- using electronic communication which reliably identifies the person and indicates the person’s intention in respect of the contents of the document (e.g. by affixing the person’s signature in the execution block and expressly stating in the document the person’s intention to be bound by the document).
In both cases, the copy, counterpart or electronic communication must include the entire contents of the document, but does not need to include the signature of another person signing.
Some of the ways in which a document may now be signed electronically (albeit until the Determination expires) include:
- pasting a copy of a signature into a document
- signing a PDF on a tablet, smartphone or laptop using a stylus or finger
- cloud-based signature platforms like DocuSign.
The Determination does not expressly state that it applies to execution of deeds. However, section 127(3) of the Corporations Act states that ‘a company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subsection (1) or (2)’.
Accordingly, as the Determination purports to amend section 127(1), in our view, a deed can also be executed electronically by a company, provided that it is expressed to be executed as a deed in accordance with section 127(1).
If you would like more information about the regulation, please contact our specialists.