Electronic Execution by Corporations – Requirements and Practical Guidance
Summary:
* corporations can once again execute documents electronically
* parties need to use electronic methods which reliably identify signatories
* complying methods and techniques for electronic execution are provided below
Explanation
The passing of the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth) means that once again from 14 August 2021 corporations will be able to execute documents electronically, and others will be entitled to rely upon the assumptions under section 127 of the Corporations Act 2001 (Cth) in respect of such execution.
This was the situation until mid-March earlier this year when temporary regulations expired.
A person can now sign a document on behalf of a corporation if:
the copy or counterpart document signed includes the entire document;
a method is used to identify the person and indicate that the person intends to sign a copy or counterpart of the document and that method was either reliable in proving the identity of (or is proven to identify) the signatory.
In addition:
“split” execution is expressly permitted – that is, where there are two signatories for any entity, those signatories may sign separate counterparts of the document; and
affixing of a common seal can be observed electronically (provided the witness signs the document and includes a statement that they observed the affixing by electronic means).
Accordingly, for signing to be valid the whole document must be provided to the signatory – it is not sufficient to provide execution pages only, or a document which does not include all relevant attachments. Further, where documents are signed in counterpart, full versions of all counterparts should be retained by the parties.
The requirement that the electronic technique used for signing must identify the person signing can be satisfied in a number of ways. Parties signing documents should consider carefully whether the methods they are using for electronic execution do enough to reliably identify the signatory, in and of themselves, or through the provision of further evidence, taking into account the significance of the relevant document. See below for examples of methods for signing and identifying signatories that will likely qualify.
The arrangements apply to all documents – that is, deeds and other agreements.
These new provisions supplement existing electronic execution legislation implemented throughout the various states, which facilitate execution by individuals and under powers of attorneys – although, there are some inconsistencies between the state legislation meaning that deeds, for example, can (currently) only be valid electronically executed in Victoria, New South Wales and (temporarily) Queensland.
This legislation which modernises the approach to execution is welcome at a time when the impacts of COVID-19 are inhibiting the ability to sign and exchange hard copy documents, and in any case given the prevalent use of electronic devices to attend to business and personal matters.
These arrangements under the Corporations Act end on 31 March 2022, unless further extended.
What techniques can be used for electronic signing?
A signatory may sign a document electronically in a number of ways, including:
using a digital signing platform (eg DocuSign, AdobeSign, SignNow);
using a finger or stylus or similar electronic pen to hand sign the document in screen;
printing and signing hard copy documents, and scanning the signed document;
inserting an electronic image of a signatories signature.
What methods reliably identify signatories?
The following methods may be considered to reliably identify a signatory signing a document electronically:
using a digital signing platform (see above), inserting the signatory’s chosen signature, which is ideally linked to a particular device, log in or password;
including wording in the execution panel under which the signatory confirms that the electronic signature was inserted by them and they intend to be bound;
sending signed documents under cover of an email confirming electronic execution and an intention to be bound;
including an electronic execution clause in the document under which the parties confirm that electronic execution of the document is intended to be binding, and identify the relevant signatories’ names in the execution panel.