The Federal Government has registered a legislative instrument permitting electronic signatures and virtual meetings to assist continuity of business operations despite the pandemic.
Introduction
On 5 May 2020, the Federal Treasurer provided short-term regulatory relief from provisions relating to meetings and signatures under the Corporations Act 2001 (Cth) and the Corporations Regulations 2001 (Cth). The Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Cth) is aimed at facilitating the continuation of business and minimising the economic impact of COVID-19. The changes enable companies to hold annual general meetings, and other meetings prescribed under the Act, entirely electronically, clarifying the ambiguity around virtual meetings under the Act. Additionally, the Determination will provide reassurance to company officers that documents signed electronically have been validly executed.
The legislative instrument commenced on 6 May 2020 and will remain in effect for six months.
Electronic signatures
The Determination modifies section 127 of the Act to permit directors and company secretaries to sign a document electronically, or to execute a document by way of counterparts of the physical document.
The electronic copy or counterpart must include the entire contents of the document, however there is no requirement for the signature of another party to the document to be included.
The Determination's Explanatory Statement offers the following examples of electronic execution:
- pasting a copy of a signature into a document
- signing a PDF on a tablet, smartphone or laptop using a stylus or finger
- cloud-based signature platforms like DocuSign.
Virtual meetings
Meetings required or permitted to be held under the Act or the Regulations may now be held using technology that gives anyone entitled to attend a reasonable opportunity to participate without being physically present. This change offers welcome relief to companies given the previous uncertainty surrounding entirely virtual meetings, as discussed in our article How to meet AGM requirements despite COVID-19 restrictions. Quorum, voting, participation, proxy, and notice requirements are now capable of being met by using technology.
In relation to voting, companies must ensure that votes taken at the meeting are taken on a poll, rather than by a show of hands. Notices of virtual meetings must include information about how those entitled to attend can participate in the meeting, including details relating to voting and speaking at the meeting. If a notice of meeting has already been distributed without these details, it must be reissued at least seven days before the meeting is held.
Issues
As section 127 only applies to a 'company' registered under the Act, the new electronic signature provisions will not offer assistance to entities outside this definition. Similarly, the virtual meeting provision only extends to meetings required or permitted to be held under the Act. Therefore, entities such as foreign companies, incorporated associations and registered charities will not be within the ambit of all, or part of, the relief.
Some commentators have expressed concern regarding whether the section 127 modifications extend to deeds. The common law position is that electronic deeds are not permitted, given that deeds require a wet ink signature on paper, parchment or vellum. There has been ongoing debate over whether section 127 overrules the common law requirement. The Determination and its Explanatory Statement are silent on this point, however the Explanatory Statement notes that:
The entire process of executing a document can be carried out using electronic communications, so long as a method as reliable as appropriate to the circumstances is used to identify each person and his or her intention to execute the document on behalf of the company.
This suggests that companies are permitted to execute deeds electronically where reasonable steps are taken to identify each person and their intention to execute the deed on behalf of the company.
ASIC guidance
In response to the Determination, ASIC has issued guidance to companies looking to hold electronic meetings. This guidance will remain in place for the duration of the Determination (i.e. until 5 November 2020). ASIC re-iterated its 'no action' position towards virtual meetings, see our discussion here. ASIC has strongly encouraged companies to hold virtual or hybrid meetings where possible.
Cooper Grace Ward is a leading Australian law firm based in Brisbane.
This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.
