Where are we?
Federal corporations legislation
Our own view is that companies can use section 127 of the Corporations Act 2001 to sign documents electronically, but others are not so comfortable. Clarification is necessary.
As we previously reported, the temporary relief provided by the Treasurer's Determination and its enabling legislation expired on 21 March 2021.
A bill to replace and preserve at least some of its features, the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (TLAB 1) passed the House in March, but stalled in the Senate. It contains temporary amendments to s127 on execution and temporary amendments providing for hybrid meetings (physical meetings with remote participation) but not virtual meetings. Those amendments would expire on 15 September 2021.
TLAB 1 ran into headwinds because of a third set of provisions dealing with liability in relation to continuous disclosure requirements. It was the subject of two separate Senate committee reports.
The first was produced on 16 March 2021. It approved the Bill, with the Green and Labor members dissenting in relation to continuous disclosure.
The second was produced on 30 June 2021. It broadly approved TLAB 1's proposed temporary amendments concerning electronic execution and hybrid meetings, with a recommendation that the Government look at making them permanent, but recommended against TLAB 1's proposed permanent amendments concerning continuous disclosure (with Coalition dissent).
In June, Treasury released for comment an exposure draft of an additional bill containing further amendments. The amendments would make the changes on electronic execution permanent, and in a welcome move would allow execution under s127 by sole director companies with no secretary. They would, on a permanent basis, allow for hybrid company meetings and virtual company meetings — but the latter only where authorised by the company's constitution.
We and the other firms in the Walrus Committee1 lodged a submission in relation to the documentation execution provisions.
But in the meantime, as outlined above, the extended lockdown has focused minds and increased the urgency. There are growing calls for resolution.
Unfortunately, nothing can be done federally until Parliament resumes in August. Proposals are being discussed as to how this might be dealt with as soon as Parliament does resume.
In theory, in relation to electronic execution that should not be too hard. The COVID emergency continues. There is political consensus and widespread support. It has been the subject of multiple reviews and a twelve-month trial in the real world. There is precedent emergency powers legislation. But so far electronic execution reform has faltered by being tied in legislation to other issues.
We wait and see.
New South Wales
In New South Wales the Government recently completed consultation in relation to making changes to permanently allow audiovisual witnessing. We lodged a submission in conjunction with King&Wood Mallesons. They are now drafting the relevant legislation.
Currently s38A of the Conveyancing Act 1919 (NSW), expressly allowing electronic execution of deeds, does not apply to corporations law except where they sign by an attorney who is an individual.
The Government is also considering further reforms to expand the circumstances in which electronic signatures may be used under NSW law. There does not appear to be any urgency, and responsibility appears to be split between ministries.
The amendments allowing for electronic deeds and remote witnessing discussed here are now permanently part of the law. As Victoria does not require deeds to be witnessed, this is an attractive governing law.
The expiry date of the temporary regulations dealing with electronic deeds and remote witnessing discussed here has been extended to 30 September 2021. The Government has now introduced legislation to Parliament which would further extend the expiry date to 1 May 2022 (Public Health and Other Legislation (Further Extension of Expiring Provisions) Amendment Bill 2021).
As we have said before, the relevant provisions on deeds are a model. They are particularly useful where a corporation needs to sign a deed.
We trust that the Queensland Government will work on legislation making permanent changes along the lines of those in the temporary regulations.
Longer term reform across Australia
The Federal Government is also leading interjurisdictional work with the states and territories to consider modernising document execution, with a view to having a uniform approach throughout Australia. That is extremely welcome, but will not be available to deal with the immediate crisis.
A risk-based approach
It is important in the circumstances that parties adopt a risk-based commercial approach. In particular, whatever their view of s127, they need to bear in mind that the section is not the only way Australian companies can execute documents. As we said in our webinar last year, there are often alternative approaches and workarounds so companies can execute documents electronically or remotely. Since then, further mechanisms have opened up under the legislation referred to above, particularly the Queensland regulation.
One good starting point when contemplating signing a deed is: does it really need to be a deed?