Why there are changes and the nature of the changes
The lockdowns and restrictions due to the emergence of the COVID-19 pandemic in early 2020 highlighted the rigidness of the Corporations Act 2001 (Cth) (Act) in relation to carrying on a company.
In response to the difficulties faced by companies, relief was temporarily introduced to enable companies to utilise technology in order to hold meetings, execute documents and send meeting material. These initial measures ceased in March of 2021.
However, due to the current COVID-19 climate and the outbreak of the Delta strain on 13 August 2021, the Federal Parliament has enacted the Treasury Laws Amendment (2021 Measures No.1) Act 2021.
The incoming legislation reflects the temporary relief that ended in March 2021 and in addition provides for:
- certainty that all documents may be electronically executed by a company under section 127 of the Act, including deeds;
- remote electronic witnessing of the affixing of a company seal; and
- meetings of the shareholders of a company to be held virtually.
Important things to note when executing documents under the ‘new’ section 127 of the Corporations Act.
Documents may be electronically signed by a company provided that the method utilised indicates whether the person signing the document has the intention to sign a copy or counterpart.1
This will be satisfied by:
- using a digital signing platform such as DocuSign which automatically inserts the person’s signature; or
- including in the document words to the effect of “electronic signature of me [insert name], affixed on [time date] below the electronic signature.
When executing documents, the Act requires that the copy or counterpart of the document that is being signed includes the entire contents of the document. This means that signing a single page containing the execution panel for signing, extracted from a complete document and signed by itself will not satisfy the requirements of section 127.2
The reforms also expressly permit split execution by companies. This means that a copy or counterpart of a document signed in wet-ink or electronically, does not need to include the signature of the other person signing the document. The company is able to execute and bind itself accordingly by having two directors, or one director and a company secretary, sign two different counterparts, either both physical, electronic or a mix.
Other important administrative aspects to note:
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Holding meetings |
Companies will be able to hold a virtual or hybrid (in person and virtual) meetings if it is consented to by all directors. If the meeting is entirely virtual, the company’s constitution must include a provision allowing for completely virtual meetings. It is important that company constitutions are reviewed and amended, if necessary, in order to utilise the legislative amendments. There are no requirements or specifications around the type of technology that can be used. This flexibility allows for future technological advancements to be used in holding meetings. |
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Quorum |
Both physical and electronic attendance will be counted to determine whether there is a quorum. |
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Time and location |
If the meeting is held entirely electronically, it will be taken to be held at the registered office of the company. If the meeting is a hybrid meeting, the time will be the time at the physical location that the meeting is being held. |
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Electronic communication |
Materials relating to meetings may be given or signed using electronic means, including:
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On the horizon
The explanatory memorandum initially determined the sunset date of this relief to be 16 September 2021. However, this date has been revised and extended to 31 March 2022 amidst recent outbreaks and restrictions.
It also foreshadows the Government’s intention to make permanent the changes relating to electronic communication and to conduct an ‘opt-in pilot’ for hybrid annual general meetings with the permanent changes anticipated to come into effect when the temporary extension sunsets.
Authors: Nicholas Davies (Graduate), Michael Mayes (Partner and Paul Wong (Partner)
1 Corporations Act 2001 (Cth) s 127(3)(B)(a).
2 Corporations Act 2001 (Cth) s 127(3)(B)(b).
About the Authors
