Electronic execution - Temporary measures reinstated | Dentons - JDSupra - JD Supra

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Common sense prevails. Until March 31, 2022.

Companies can – once again – electronically execute documents under section 127 of the Corporations Act 2001 (Cth) (Corporations Act), largely mirroring the 2020 Coronavirus response measures.

The sun-setting of the electronic execution provisions provided by Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 during the COVID-19 lockdowns in March 2020 has been resolved with additional temporary measures, largely reinstating the acceptability of electronic execution.

Such relief is necessary given the breadth of the current Australian lockdowns aimed at slowing the spread of COVID-19.

The much awaited introduction of the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth) (Act) will, once again, ease pressure on companies having trouble facilitating wet-ink executions and will encourage continuity of business.

For now, the changes are a temporary stopgap – taking effect from August 14, 2021 (with no retrospective application) and automatically lapsing on March 31, 2022 (see section 1679F of the Act).

The Explanatory Memorandum issued with the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 makes clear that the Federal Government intends to implement permanent reforms to allow electronic execution under section 127 before the temporary measures reach their sunset date in March 2022.

What are the temporary changes to section 127 of the Corporations Act 2001 (Cth)?

Expressly contemplates execution by electronic means

New sub-section 127(3B) has been inserted which provides that a copy or counterpart of a document may be signed by a company electronically, provided:

A method is used to identify the person signing and that method indicates the person’s intention to sign a copy or counterpart (section 127(3B)(a)).

Examples of how this can be satisfied include:

• Using a digital signing platform (such as DocuSign) which automatically inserts the signatory’s name and digital signature when signed;
• Including in the document words to the effect of “electronic signature of me, [insert name], affixed on [insert date/time]” below the relevant signature.;
• Signing the electronic document with a stylus tool, finger or mouse and the signatory returning the signed document to the company with a covering email acknowledging electronic execution and an intention to be bound; or
• Including a simple electronic execution clause in the contract which acknowledges that a copy or counterpart may be signed by the parties electronically (but provided each signatory’s name is also inserted below their signature to ensure that the signatory is appropriately identifiable).

Counterpart or copy must include entire document

Section 127(3B)(b) provides:

The copy or counterpart signed includes the entire contents of the document.

Often with large documents, a company's signatories may be sent a single page containing the execution block for signing. Where the execution page is extracted from the larger document and signed in isolation, the requirements of section 127 will not be satisfied.

Method of execution must be reliable

Section 127(3B)(c) provides:

The method of execution used must be reliable for the purposes (or be proven in fact to have fulfilled the purpose) for which the document was generated.

No particular means of execution is specified as being “reliable”.

Our interpretation of the Explanatory Memorandum provides that any method of electronic execution where a company officer applies their signature directly to the copy or counterpart (whether by using a stylus tool, finger or mouse to sign an electronic copy of a document, by copying and pasting their signature into an electronic copy of a document, by signing in wet-ink and scanning in or by using a digital signing platform), would be considered reliable for the purposes of this section, in line with the Act’s technology neutral approach.

No retrospectivity

The changes introduced by the Act have no retrospective effect and, therefore, the Corporations Act does not expressly permit electronic execution by companies between March 22, 2021 and August 13, 2021.

All documents included

The amendments described include all documents, including deeds, may be electronically executed by a company under the amended section 127.

Action points

The amendments provide the changes introduced by the Act provide flexibility for company officers when signing documents and entering into contracts.

Officers may use a wide range of methods to sign documents. These methods include:

• Each company officer using a digital or cloud-based signing platform (such as DocuSign) to apply their electronic signature;
• Use of wet-ink execution of physical documents (whether in a single document or via split execution);
• Printing and signing the document in wet-ink and then scanning the document to a second signatory who also prints that counterpart (or, if using split execution, an unsigned copy of the document), signs in wet-ink scanning back the executed document to the company or counterparty;
• Each company officer signing an electronic copy of the document with a stylus tool, finger or mouse (whether in a single copy or via split execution);
• And by copying and pasting into an electronic copy of the document an image of the signatories’ signatures (again, whether in a single copy or via split execution);
• Or by a combination of the above methods.

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Electronic execution - Temporary measures reinstated | Dentons - JDSupra - JD Supra
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