It often surprises some corporate signatories that they cannot use electronic signatures to validly execute documents on behalf of their company. So why can’t companies do what individuals can?
The COVID-19 Pandemic has caused a number of challenges, including the execution of documents.
With the prospect that signatories could be in “lockdown” and other logistical challenges caused by COVID-19 related restrictions, the Federal Government enacted “temporary relief legislation” in May 2020 to allow companies to execute documents electronically.
The legislation made it clear that companies could sign documents (including deeds) electronically in accordance with the Corporations Act 2001 (Cth) (“the Corporations Act”) from 5 May 2020 to 21 March 2021.
This assisted to resolve the uncertainty that existed prior to 5 May 2020 as to whether companies could validly electronically execute documents in accordance with s 127 of the Corporations Act.
The legislative changes were welcomed by the corporate world and the legal industry alike, ensuring the legal framework better reflected the practice within the community that had already existed for some time.
This all changed on 22 March 2021 when the legislative framework ceased to apply. As a consequence, there is now no certainty that:
- an agreement can be validly executed by a company under s 127 of the Corporations Act by electronic means;
- the statutory assumptions (i.e. that the signatory of the company was duly appointed to their position and authorised to enter into the transaction) under s 129 of the Corporations Act will be available to the other party if a company executes an agreement electronically; or
- the requirements of s 127 of the Corporations Act or s 41 of the Law of Property Act 1936 (SA) enable companies to execute deeds electronically.
Despite this, many companies have continued to execute documents electronically, even though the company’s execution may be invalid. This has caused uncertainty as to the legal status of documents executed electronically by companies since 22 March 2021.
In what will come as a relief to many the Commonwealth Treasury recently released the Treasury Laws Amendment (2021 Measures No.1) Bill 2021 (“the Bill”) which proposes to amend the Corporations Act to make it clear that companies can validly electronically execute documents (including deeds).
Whilst the Bill is yet to be formally introduced as law, if enacted it will reinstate the position that existed between 5 May 2020 and 21 March 2021 in which companies could utilise the benefits of electronic execution and remove the uncertainty which has since subsequently arisen.
Our Property team at Cowell Clarke will continue to monitor the status of the Bill and can assist with queries about electronic execution by companies. Please do not hesitate to contact us if you have any questions or require assistance.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.