With people working from home, or in lockdown, self-isolation or quarantine it has become more difficult for company officers to conduct physical, wet-ink execution of documents.  As such, on 6 May 2020, a new temporary law was passed (which will last for 6 months from that date) that makes it easier for company officers to sign documents.

This temporary law, which is implemented by way of the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (“Determination”), modifies the operation of s127(1) of the Corporations Act 2001 (Cth) (Corporations Act) to provide, among other things, that an agreement or deed can be signed electronically by company officers.

Background on section 127(1) of the Corporations Act

Section 127(1) of the Corporation Act states that a company may sign a document without using a common seal if the document is signed by:

• 2 directors;
• a director and a company secretary; or
• where the company has a sole director who is also the sole company secretary – that person.

If a company executes a document in accordance with section 127(1), people will be able to rely on the assumptions in section 129(5) of the Corporations Act (that is that the document has been duly executed by the company) for dealings in relation to the company.

What the Determination does

In summary, the Determination:

• Extends section 127(1) to also cover execution of a document in electronic form.

• Modifies Section 127(1) so that a company may execute a document without a common seal if 2 directors, a director and company secretary or the sole director/company secretary of a proprietary company either:

• sign a copy or counterpart of the document in physical form; or
• sign a document electronically, provided appropriate and reliable electronic communication that identifies the person and indicates the person’s intention about the contents of the document is used.

• Provides that the copy, counterpart or electronic communication must include the entire contents of the document, but it does not need to include the signature of another person signing the document physically or electronically.

What this means in practice

From a practical perspective, this now means that while the Determination is in force, the following methods of signing an agreement or a deed are permitted under section 127(1) of the Corporations Act:

• company officers may now wet-ink sign different copies of the document (i.e. the officers do not need to sign the same physical document);
• 1 company officer may wet-ink sign a document and can then fax or email a PDF copy of if to the other company officer and that second company officer can wet-ink sign that faxed or PDF copy;
• company officers may apply separate electronic signatures to electronic versions of the document (e.g. by pasting a copy of a signature into an electronic version of the document, signing a PDF of the document on a tablet, smartphone or laptop using a stylus or finger, or using a cloud-based signature platform like DocuSign).

Accordingly, the entire process of signing a document can be carried out using electronic communications provided that:

• the electronic communication is reliable under the circumstances to identify each signatory and their intention to sign the document on behalf of the company; and
• the entire contents of the document are included in the electronic communication (i.e. not just the signature page(s)). 

Some limitations

Please note that the following limitations still exist:

• The Determination does not change the requirements for signing documents (in particular deeds) where the signatories include individuals.  For example, deeds signed by an individual must usually be witnessed and attested.  However, the requirements relating to witnessing document signings are also being updated in light of COVID-19 – we will publish further information about this separately.
• The Determination does not assist where the signatories are entities that are not covered by section 127(1) (e.g. statutory corporations, foreign entities, governments and partnerships).
• The Determination only assists in relation to documents signed after 6 May 2020.
• The Determination will cease on 6 November 2020.

If you have any questions on signing a document, please get in touch with one of the Sierra Legal team.