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Changes to electronic signing for companies

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Traditionally, company documents were required to be physically signed by their director/s – one of many rigid requirements imposed on this entity type. During the earlier stages of the COVID-19 pandemic the Federal Government provided temporary relief of the strict procedures around wet signatures to allow for the changed business environments, however this expired on 21 March 2021.

As the pandemic persists and we continue to adapt, the Federal Government has introduced new temporary rules in relation to electronic signing and virtual meetings. The rules are effective from 14 August 2021 and expire on 1 April 2022. They do not apply retrospectively. After this expiry point, the government intends that permanent changes of this nature will be put in place.


Electronic signing conditions

Under the new legislation, a company may execute a document electronically if three conditions are all satisfied:

  1. A method is used to identify the person and to indicate the person’s intention to sign a copy or counterpart of the document. Methods for this might include:
    a. using a cloud-based signing platform such as DocuSign; or
    b. using a stylus, finger or mouse to sign a PDF and emailing the signed document to the company with a covering email acknowledging the intention for electronic execution.
  2. The copy or counterpart includes the entire contents of the document. It is not satisfactory to simply send the page containing the execution block.
  3. The method used is as reliable as appropriate for the purpose for which the document is generated. There are many ways for a company officer to apply their signature and intention to sign. The legislation takes a technology-neutral approach, not specifying any single method as “reliable”.

While the new rules relating to the electronic execution of company documents intend to facilitate new procedures, a company may continue to execute documents in the traditional manner by applying wet signatures to the physical paper document.

Executing by counterparts

A company may execute and bind a document by having two directors, or one director and a company secretary, sign two different copies or counterparts. Each copy or counterpart need not include:

  • the signature of another person signing the document; or
  • any material to identify another person signing the document or to indicate another person’s intention in respect of the contents of the document.

The new law also permits a combination of different methods to be used to execute a company document. For instance, one director may physically sign a paper version of the document while the second director could sign the document using electronic means.

Why this is important and how we can help?

As of June 2021, there are more than 2.9 million companies registered in Australia. This law will affect the execution of documents for all of these companies and in many cases streamline previously onerous processes, making it a widely significant piece of legislation. Company Directors and their advisers should remain informed of their requirements, and also the opportunities to improve their efficiency.

You can discuss any company related matters with our experienced team on 07 3223 6100 or email redchip@redchip.com.au.

The Act can be found here and the Explanatory Memorandum can be found here.

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