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The Corporations Amendment (Meetings and Documents) Bill 2021 (Bill) was introduced into Parliament on 20 October 2021. The Bill adopts feedback received during its public consultation process and is intended to replace and extend the temporary measures under the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth) that became law in August 2021 (as summarised here) and which will remain in place until the end of March 2022.
The Bill seeks to permanently modernise the process for the valid execution of documents under the Corporations Act 2001 (Cth) (Corporations Act) and (if passed) the proposed changes will come into effect on 1 April 2022, after the temporary relief expires. While it remains subject to Parliamentary debate, the Bill as it stands is a positive step that will assist businesses to take advantage of existing and emerging digital technologies. As a demonstration of the potential economic impact of the Bill, research by Accenture for the Deregulation Taskforce found that the reforms to the execution process are alone estimated to save over $400 million in direct costs and wasted time each year.
The Bill has been referred to the Senate Economic Legislation Committee which is accepting submissions until 8 November 2021. The Committee is due to issue its report on 18 November 2021.
In relation to the proposed changes to the execution process for companies, the Bill if passed in its current form will differ from the existing temporary measures in several key respects:
No more paper
No longer will it be necessary for signatories of a company to physically sign documents in wet-ink or in the presence of a witness. The Bill is technology ‘neutral’ such that it does not prescribe permitted methods of electronic execution. Documents may be signed electronically and “split-execution” will be permitted (i.e. different officers of a company will be permitted to execute different copies of the same document and will not be required to execute in the same manner). The Bill also clarifies that the document executed need not include all information recorded in a particular document, effectively permitting the practice of executing signature pages of a document only.
The Bill also makes it clear that the statutory electronic execution regime will apply to deeds and displaces the common law ‘paper rule’ such that deeds can take electronic form and will no longer be required to be made on paper, parchment or vellum. Deeds executed by an agent or attorney on behalf of a company will also not need to be witnessed or delivered to be validly executed.
It is important to note that companies will still be able to require that a deed be delivered in order to come into effect if that is the intent of the parties.
The flexibility offered under the reforms with respect to using technology to achieve valid execution is a welcome development. While hardcopy documents and traditional wet-ink execution will remain valid execution under the Corporations Act, it will be interesting to see the prevalence of such forms of execution by companies should these reforms become law.
It will be possible for a person signing in more than one capacity to sign the document just once if the document requires or permits the person to do so and states the capacities in which the person is signing. The person will be treated as a different person in each capacity. The practical outcome of this amendment is that, for example, an individual who is a director of more than one company may now sign a document once on behalf of all the companies for whom they are a director.
No secretary? No problem.
Sole directors of proprietary companies without a company secretary will now be able to validly sign documents on behalf of the company under section 127 of the Corporations Act and those relying on the validity of such execution will have the benefit of the assumptions under section 129 of the Corporations Act. Previously this regime only applied where a company had a sole director who was also the company’s sole secretary.
Execution by agents
The Bill will also entirely replace section 126 of the Corporations Act such that agents (including attorneys) can make, vary, ratify or discharge a contract or execute documents (including deeds) on behalf of a company under the new flexible rules. The proposed changes will also displace the common law requirement for an agent to be appointed by deed in order to be able to deliver a deed effectively. The statutory assumptions in section 129 of the Corporations Act will also extend to agents signing under the new section 126.
What about signing by individuals?
It is important to keep in mind that the proposed new execution regime will only apply to the execution of documents by companies (by its officers, agents and attorneys) and not individuals. This means that the laws of each State and Territory that currently apply to execution by individuals will continue to be the relevant law in this regard.
The current laws as to company execution that was originally legislated in 2001 are not reflective of an economy that is continuing to embrace emerging digital technologies. The current laws are restrictive and create unnecessary and costly barriers to the valid execution of documents by companies. The reforms proposed by this Bill will, if passed in their current form, go a long way to creating a modern technology neutral regime that gives greater certainty as to valid execution by contracting parties.