COVID-19 prompts changes to the way you can execute documents under s 127 of the Corporations Act
The Federal Government has made a Determination, which allows for documents to be electronically executed under s 127 of Corporations Act. Importantly, the changes are only temporary and will come to an end on 5 November 2020.
What does s 127 say?
Section 127 of the Corporations Act allows Australian companies to execute documents without a common seal if they are signed by:
two directors; or
a director and a company secretary; or
for proprietary companies with a sole director who is also the sole company secretary, by that director.
Opinions have varied for a while as to whether a document may be electronically executed under s 127. Last year, Justice Stanley of the Supreme Court of SA said in a decision that “given s 127(1) contemplates a document being executed by two officers signing it, there is good reason to consider there must be a single, static document rather than a situation where two electronic signatures are sequentially applied to an electronic document”.
Section 6 of the Determination says that execution under s 127 can be done electronically and separately (split execution).
The method of electronic execution must be reliable and appropriate for the purposes, or proven in fact, to identify and indicate the person's intention in relation to the contents of the document (this mirrors the approach under the Electronic Transactions Act 1999 (Cth)).
There are a number of ways that officers of a company can sign a document electronically. These include:
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.
The Determination also means that signatories do not need to sign the same physical document. Instead, a document can be signed and scanned by the first signatory and then printed and signed by the second signatory, or separate electronic signatures can be applied to fully electronic versions of the document.
The entire document must be signed in all cases; in other words, you can’t just circulate the signing page.
A person may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with the Determination (consistent with s 129(5) of the Corporations Act).
The Determination does not change the existing position under s 127 for execution using a common seal; nor does it affect the laws or requirements of any other jurisdiction, which may limit the documents that can be executed electronically.
The practical need still exists for companies to retain copies of executed documents and, where there is ‘split execution’, copies of each executed version. Given the requirements of the Determination regarding signatures being affixed to the entire document, the entire signed document should be retained.
These temporary changes will hopefully show the value of having more flexibility in this area of law and form the genesis of permanent changes.
If you would like to discuss the Determination, including our view that it extends to the execution of deeds, or if you have any questions or uncertainties about the temporary measures, please get in touch.