Assisted by Ruby Ritchie
Are you the sole director of a proprietary company who does not also hold appointment as the company secretary? Have you previously been advised (for example, by your bank) that the execution clause in documents you sign cannot state you are signing under section 127 of the Corporations Act 2001 (Cth) because you are also not the sole company secretary? Were you confused by what difference this made?
If yes, then the recent amendment to section 127 of Corporations Act 2001 (Cth) (the Act) by the passing of the Corporations Amendment (Meetings and Documents) Bill 2021 will clear up the confusion. From 1 April 2022, when the amendments came into effect, you can finally sign documents under section 127 of the Act despite only being appointed as sole director and not also as company secretary.
Section 127 of the Act – pre amendment
Prior to the amendment, section 127(1) of the Act provided that a company could validly execute a document on behalf of the company if it was signed (with or without common seal) by:
- 2 directors;
- a director and company secretary; or
- for a proprietary company that has a sole director who is also the company secretary – that director.
However, section 204A of the Act makes it clear that a proprietary company is not required to have a secretary. So, for the sole director of a proprietary company, who was not also the secretary, this created an anomaly.
Why sign under section 127 of the Act?
Signing under section 127 of the Act allows the other party to the document to make certain assumptions in respect of the signing of the document and person signing. These assumptions are set out in section 129 of the Act.
Section 129(2) of the Act provides, amongst other things, that a person may assume that anyone who appears from the ASIC record to be a director or a company secretary of the company:
(a) has been duly appointed; and
(b) has authority to exercise the powers and perform the duties customarily exercised or performed by a director or company secretary of a similar company.
The Amendments to section 127 of the Act?
In passing the Corporations Amendment (Meetings and Documents) Bill 2021 (Bill), from 1 April 2022, section 127 was amended to allow sole directors (who are also not the company secretary) to execute documents on behalf of their company. As a result of the amendment, section 127(1)(c) of the Act now provides:
(c) for a proprietary company that has a sole director — that director, if:
(i) the director is also the sole company secretary; or
(ii) the company does not have a company secretary.
We see a similar amendment now made to the assumptions that can be relied upon in section 129 of the Act. In section 129(5) for example, which relates to documents signed by the company without use of the common seal, and 129(6), which relates to documents signed with use of the common seal, a person may assume also that a person who states next to their signature that they are the sole director of the company, and if that company does not have a company secretary — then they are the sole director.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.