After a frustrating period of successive ‘on again, off again' temporary measures, the Senate last week passed the Corporations Amendment (Meetings and Documents) Bill 2021.
When the bill receives formal assent, it will permanently amend the Corporations Act in relation to execution of documents by companies and their representatives. The amendments go significantly further than previous temporary regimes and will be welcomed by all who have been grappling with the shifting sands of recent years.
SIGNING DEEDS WITHOUT A POWER OF ATTORNEY
Probably the most consequential change is to section 126, hitherto a fairly dull provision confirming that companies can act through agents.
Section 126 gets a wholesale rewrite to the effect that companies will be able to execute deeds (in any of the ‘technology neutral' ways discussed below) by authorised representative, without a witness, and without the need for the appointment to be by deed.
In short, authorisation by board resolution (or even implied authority) will suffice to allow an individual to execute a deed on behalf of a company. There will no longer be any requirement for a formal power of attorney that is itself a deed, or for an individual signing a deed on behalf of a company to have the signature witnessed.
This will add considerable flexibility, especially where s129(5) assumptions are not essential in the circumstances (if they are, execution will still need to occur via section 127).
‘TECHNOLOGY NEUTRAL SIGNING'
A new section 110A will expressly permit a person to sign specified categories of document (including deeds) either by signing a physical form of the document or by signing an electronic form of the document, provided the method of signing:
(a) identifies the person and indicates their intention in respect of the information recorded in the document; and
(b) is ‘as reliable as appropriate' for the purpose for which the information was recorded (or is proven in fact to have fulfilled the required functions in (a) above, by itself or together with further evidence.
This is similar to the current language in s127 (and is based on electronic transactions legislation). The documents covered are not however confined to documents signed under s127, and extend to include documents signed by corporate agents under s126 and documents relating to meetings and resolutions of boards and members. There is scope for additional categories of documents to be added by regulation.
There is clear articulation that a person does not need to sign the same form of the document (or the same page of the document) as another person, or to use the same method to sign as another person. A note provides a specific example of execution under s127 by one director signing a wet ink document and another electronically signing an electronic form of the document.
UPDATES TO SECTION 127
Section 127 gets a refresh now that the new ‘technology neutral' provisions do the heavy lifting on the mechanics of signing. Most of this does not materially change the current position.
However the current requirement in section 127(3B) about both corporate officers signing a copy or counterpart that includes the entire contents of the document does not appear in the amended legislation. That said, the commonly understood requirement in the context of deeds is that they must be executed as a single intact instrument, and so it would be prudent to continue take this approach for deeds at least.
In addition, Section 127(1)(c) gets a long-awaited fix so that a sole director of a company that does not have a secretary will be able to sign under section 127 (currently only a sole director who is also the sole company secretary falls within the section).
OTHER KEY UPDATES
The new legislation includes express recognition (previously only implicit) that deeds signed by or for companies can be in electronic form and do not have to be on paper, vellum or parchment.
There is also additional clarification confirming that a person signing a document in more than one capacity can in most cases sign a document once, covering all capacities. So for example an individual signing as director for two separate companies can sign a single execution block expressed to cover both (however it will be important to get the execution blocks right – it seems that if the document includes separate execution blocks for the two companies the director will need to sign twice).
Finally, section 129(5) gets beefed up so that a counterparty will be entitled to assume a signatory is a director, secretary, sole director and sole secretary, or sole director with no secretary, if that is stated next to their signature.
COMPLEXITIES REMAIN FOR ELECTRONIC EXECUTION OF DEEDS BY PARTIES NOT COVERED BY THE CORPORATIONS ACT
The provisions outlined above are limited to companies registered under the Corporations Act. Importantly, they do not operate to facilitate execution by foreign companies (nor do they assist individuals, other than those signing as authorised agents of Corporations Act companies under the revised section 126).
Parties executing deeds who do not fall within the Corporations Act must still look to the common law, as modified by applicable State and Territory legislation.
In the major east coast jurisdictions (Queensland, NSW and Victoria) there is fairly comprehensive legislation currently in place which should permit electronic signing of deeds by most categories of counterparty. However the approaches differ, and formalities (especially as to witnessing requirements) vary.
Elsewhere, however, individuals and foreign corporations will generally still be required to execute wet ink counterparts in the traditional way.
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.