Updates on electronic execution and remote witnessing
The pandemic has focused minds on the need for law reform, to clarify that documents can be signed electronically, so that they are fully accepted in the market, and also to allow signatures to be witnessed remotely over audiovisual links.
Some jurisdictions dealt with either or both of these things on a temporary basis by temporary legislation. But in a number of cases that legislation is expiring. There is a clear need for the reforms to be made permanent and Australia-wide.
Below you can find information on the latest changes.
Good news and bad (or indifferent) news on electronic signing – permanent legislation on deeds and remote witnessing in Queensland and New South Wales, but permanent federal legislation misses the boat for this year.
First the bad (or indifferent)
Permanent federal legislation on eSigning and hybrid and virtual meetings misses consideration in Senate this year
Unfortunately, the Senate has run out of time this year to consider the Corporations Amendment (Meetings and Documents) Bill 2021, which makes permanent reforms as to electronic execution under sections 126 and 127 of the Corporations Act, and as to hybrid and virtual meetings. You can find our previous comments on the bill here.
It had passed the House of Representatives with an amendment, first proposed by Labor and adopted by the Government, providing for a review of the virtual meetings provisions within two years. We understand it had the support of Labor in the Senate, but the Greens moved amendments which would limit virtual meetings to unlisted entities.
It must now wait until the Senate sits again next year. We gather there are only to be a few sitting days. And, of course, if an early election is called there may be none before the crucial date of 31 March 2022.
That is the date the current temporary set of amendments under the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 providing for electronic signing and split execution under s127 and hybrid and virtual meetings is due to expire.
If we miss that boat, in many ways we are back where we were at the beginning of 2020 (with some improvement).
And now the good.
Queensland adopts permanent reforms on the law of deeds expressly allowing electronic deeds
Queensland's bill, reported on here, has passed and received the royal assent with some amendments, under the name Justice and other Legislation Amendment Act 2021 (QLD).
The bill considerably simplified the requirements for deeds and is a model for other jurisdictions. Among other things, it allows electronic deeds and removes the requirement of witnessing.
The amendments made since we last reported improved the bill so that it provides for electronic execution of documents, not only by individuals, corporations and partnerships, but also unincorporated associations and the State of Queensland itself as contracting entity. But they left in place the provision that powers of attorney executed by individuals must be on paper and witnessed physically except in certain circumstances.
Some permanent legislation in NSW allowing electronic deeds by corporations and remote witnessing
- Corporations can create and sign electronic deeds
The Customer Service Legislation Amendment Act 2021 with immediate effect amended s38A of the Conveyancing Act 1919.
- Remote witnessing of documents is permanently allowed (though there are procedural requirements that may be a trap)
The Electronic Transactions Amendment (Remote Witnessing) Act 2021 amends the Electronic Transactions Act 2000 with immediate effect. The result is that the 'pilot scheme' provisions temporarily allowing remote witnessing (s14G) are made permanent.
In addition, new provisions are inserted as to what will be regarded as the original document and the place of execution, and as to the law which applies in some circumstances if the document is signed or witnessed outside NSW.
It never rains but it pours (in a good way). The green shoots we reported on last week federally and in Queensland have been joined in New South Wales.
Even before the pandemic, in 2018, New South Wales had amended its law to allow electronic deeds. Unfortunately, and frustratingly, a quirk in the drafting of the relevant provision, s38A of the Conveyancing Act 1919, meant it only covered electronic deeds signed by individuals but not corporations.
Now at last that is to be fixed. The government has introduced into Parliament the Customer Service Amend Bill 2021 which, if passed, will extend s38A to corporations.
22/10/21 - Green shoots on the road to permanent reform — new federal and Queensland bills, and national consultation
There are some very positive signs, though we need to wait for the proposals to become law.
A welcome new federal bill
The Government has introduced into Federal Parliament the Corporations Amendment (Meetings and Documents) Bill 2021 with a view to having it passed this year. It has been referred to the Senate Economics Legislation Committee for an enquiry and report by 18 November.
If passed, the Bill will permanently amend the Corporations Act in the reform areas currently temporarily covered by the Act known colloquially as 'TLAB 1'5 (discussed here), but with some differences.
The Bill would:
- provide for electronic execution by companies of documents (including deeds) in two ways:
- by their agents signing under s126, whether or not the agents are appointed by deed, and without requiring a witness
- by their officers signing under s127 (also allowing split execution)
- allow companies and managed investment schemes to hold hybrid and virtual meetings of members and directors, and allow documents and communications relating to meetings to be electronic.
Members would be able to opt out of receiving electronic documents and communications, and instead receive hard copies. In a roll back of one aspect of the temporary reforms, companies and schemes would only be able to hold virtual general meetings of members if permitted by their constitutions.
The provisions on document execution would take effect the day after royal assent.
Those on meetings would take effect on the later of that day and 1 April 2022, so the current TLAB 1 provisions (eg allowing virtual meetings without authorisation in the constitution) would continue until then.
Clarity on documentation execution under s127
The Bill would resolve permanently the issues that have bedevilled electronic and remote execution under s127, and fix up some issues left by TLAB 1.
- It allows split execution (without involving the whole document).
- It makes abundantly clear even for the most hardened doubter that there can be electronically executed deeds.
- It sorts out a practical bugbear in allowing single director companies to sign under s127, whether or not the sole director is also sole secretary.
A new pathway under s126
Section 126 currently deals only with individuals making contracts on behalf of companies as agent. Now if the Bill is passed, the section would have another role — providing for the execution of documents by individuals as agent (including deeds).
This is particularly welcome in relation to deeds. Previously where individuals signed a deed as agent for a company, they needed to comply with a patchwork of varying state and territory laws and arcane and archaic common law requirements. In a major breakthrough a number of these would be swept away for such deeds:
- The agent's signature would not need to be witnessed.
- The agent would not need to be appointed by deed.
- The deed would not need to be delivered.
- It would be abundantly clear that the deeds can be electronic.
These only apply to deeds signed by individuals as agents for companies, while s127 only applies to documents signed by officers for companies under that section.
Reforms are necessary across the universe of deeds in Australia irrespective of the nature of the parties and who signs for them. As we set out below in this update, there may be a glimmer of hope that these reforms might be achieved, though we have a long way to go.
Work in progress and the Modernising Business Communications project
Allens and the other Walrus firms (Ashurst, Herbert Smith Freehills, King&Wood Mallesons and Norton Rose Fulbright) lodged a submission in relation to the Bill. Most points were accepted and are reflected in the final Bill, but two remain outstanding. Those points may be addressed in a further Treasury project of Modernising Business Communications, which is looking at the whole issue of electronic documents and communications under legislation under the aegis of the Treasurer. They were requests to:
- extend reforms to the execution of documents by foreign and statutory corporations; and
- deal with the situation where the agent signing for a company is another corporation and not an individual.
A welcome permanent reform bill introduced in Queensland
Queensland showed the way in having clear, comprehensive reform of deeds under its temporary COVID regulation.6
Now they have introduced to Parliament a permanent bill7, which contains most of the beneficial features of the regulation.
Among other things, it would:
- allow for electronic deeds;
- remove the requirement of witnessing;
- provide a mechanism for execution of deeds by foreign and statutory corporations; and
- at least for corporations, remove the requirement that to sign and deliver a deed an agent must be appointed under a deed.
It does provide a relatively detailed and onerous regime for remote witnessing, but that is of less concern as deeds would not need to be witnessed.
It would roll back one aspect of the reform in that, except in certain circumstances, it would require a power of attorney executed by an individual to be on paper and to be witnessed physically. We have made a joint submission with King&Wood Mallesons to the relevant committee of Parliament dealing with this and other points.
Largely, though, the Queensland reforms are a good model.
Nationwide, a reform process begins
In September, the Deregulation Taskforce under the Department of Prime Minister and Cabinet, in conjunction with the Attorney-General's Department and state governments, produced a Consultation Paper on Modernising Document Execution dealing with the modernisation of the execution of statutory declarations and deeds across Australia.
That raises the very welcome possibility of a uniform approach throughout Australia in relation to deeds (and also statutory declarations), including simplifying the law of deeds and ensuring they can be electronic. Needless to say, that is not an easy task, involving the coordination of nine jurisdictions, but if it can be achieved it would be a huge step forward. There are at least some useful models for legislation — the Queensland provisions and the federal bill outlined above.
We lodged a comprehensive joint submission with Ashurst, King&Wood Mallesons and Norton Rose Fulbright, and participated in three meetings with the Task Force.
Let's all touch wood, and more to the point, those organisations that can, should continue to press the various governments around Australia for this valuable reform.
The current state of temporary COVID legislation and permanent replacements
In the meantime, the various jurisdictions that have introduced temporary COVID legislation dealing with eSigning continue where necessary to extend their expiry. In Victoria the temporary provisions were replaced by permanent legislation.
We have updated our table as to the legislation in each jurisdiction.
As reported in our update earlier this week, after five months, the Government succeeded in getting Parliament to pass a Bill making temporary amendments to the Corporations Act to provide greater certainty as to e-signing by companies – TLAB1 (the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021). The Bill has today received the royal assent and the amendments take effect tomorrow.
The relief in the market at the news earlier this week was palpable. People had waited five months, and the delta lockdowns had made reform urgent. As we mentioned, in the absence of the amendments, people have needed to physically distribute paper documents during lockdown to have them signed by company officers in wet ink. Hopefully, they should be able to relax …for now.
In the midst of the delta lockdowns, there is some good news on the e-signing front, though still only temporary reform.
For a while, it should (we hope) remove the uncertainty on company e-signing that has made parties insist on wet-ink signing, and allow 'split execution' (though requiring print-outs of the whole document).
The story so far, a hole since March
As we previously reported, the Government introduced a Bill in March known as TLAB1: the Treasury Laws Amendment (2021 No.1) Bill 2021.
- temporarily amends sections 127 and 129 to provide expressly for e-signing and split execution, and also the meetings provisions to allow hybrid meetings; and
- amends the law in relation to liability concerning continuous disclosure.
The Bill had passed through the House but stalled in the Senate. There was general support for the e-signing and meetings provisions but opposition to the continuous disclosure amendments.
The last Treasurer's Determination, which provided expressly for electronic execution under s127 and virtual meetings, had expired on 21 March 2021.
The result was that ss 127 and 129 reverted to the way they were 'BC' (before COVID). A number of parties were insufficiently comfortable that documents could be electronically signed under s127, with the result they were insisting on wet-ink signatures. This led to the difficulties discussed previously.
Last night's breakthrough
Last night, TLAB1 passed the Senate with some Government-sponsored amendments. This evening the House approved the amended Bill, so it may become law very soon.
The Senate amendments to TLAB1:
- extend the expiry date of the temporary relief for hybrid meetings and e-signing from 16 September 2021 to 31 March 2022;
- remove the requirement for companies and registered schemes to notify members of their right to opt in to receive documents in hard copy;
- give ASIC permanent powers to issue individual and class order relief for requirements in respect of meetings and documents in exceptional circumstances, such as those caused by the pandemic (this does not relate to ss127 and 129); and
- insert a mechanism by which the proposed continuous disclosure changes sunset if an independent expert does not review the changes within six months after the second anniversary of passage of the Bill.
Another legislative pathway — a useful fallback
Another, less heralded, Bill has passed both Houses, the Treasury Laws Amendment (COVID-19 Economic Response No. 2) Bill 2021. Schedule 4 allows responsible ministers in response to COVID to make temporary determinations modifying legislation relating to, among other things, how documents may be signed. That power continues up to 31 December 2022, and determinations made under it expire on that date.
That would allow the Treasurer to deal with uncertainties in relation to s127 by issuing another Determination. So, for a year and a half, we needn't fall in a hole like the one that opened on the expiry of the previous Determination. And there can be quick fixes, if the Treasurer is so minded.
Interestingly, determinations can be retrospective. A determination could validate past electronic signings.
What does TLAB1 achieve?
Until 31 March 2022, it should be sufficiently clear that:
- companies can sign documents electronically under s127;
- this extends to deeds; and
- companies can sign under s127 using 'split execution', where officers sign separate counterparts (though they must sign the complete document, not just signature pages).
There are some drafting issues (including some confusion as to copies and counterparts), and the requirement of a full print-out on split execution is a major annoyance when signers are using home printers, but generally we think that the changes should satisfy most parties. That said, there has been inertia as to acceptance of e-signing in the past. We shall see.
In any event, it is worth remembering that s127 is not the only way that a company can execute documents. There are numerous other ways companies can sign and lenders and others dealing with them can obtain some assurance (eg by extracts of minutes) that execution was specifically authorised to bind the company.
As foreshadowed in our last update, the Government is looking to make the e-signing (and virtual meetings) provisions permanent, and, in doing so, deal with single director companies without a secretary.
That may appear later this month.
Finally, the Government is working on further legislative reform regarding electronic signing and activity, referred to as Modernising Business Communication.
S 127 only applies to Australian companies. Foreign and statutory corporations form a significant part of the economy and should be covered by reform.
And most states and territories need to deal with deeds (ideally removing the need for witnessing).
There is widespread acceptance of the value of reform, and little, if any, opposition. But there is still 'miles to go before we sleep'. Efforts must continue.
The current spread of the highly infectious Delta strain of COVID-19 and the resulting extensions and tightening of lockdowns are throwing into sharp relief the need for legislation to clarify the law on electronic documents, as well as to allow virtual company meetings.
In a number of transactions in the past week, people had to take paper documents physically around to the houses of directors and secretaries of companies in Sydney in order to get them signed, because in the absence of clarifying legislation, the other parties required a paper signing under section 127. This is clearly an intolerable situation and needs to be resolved.
The best solution continues to be temporary or permanent legislative clarification. But in the meantime, parties can adopt a more flexible risk-based approach, and use the workarounds and alternatives that are available in many cases.
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 Committee4 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. 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?
19/03/21 - Federal bill to extend relief on virtual meetings and electronic signings does not pass, so relief lapses 21 March 2021; but progress in Victoria and Queensland.
Last night the Federal Government Bill1 in relation to electronic execution, virtual shareholder meetings and continuous disclosure was not passed by the Senate, at least for the moment.
The current relief (under a Treasurer's Determination authorised by statute)2 ends on 21 March. In relation to electronic documents and split execution, that may revive (at least to a degree) the pre-COVID position — that there are a significant number of parties that will not accept electronic signing by companies under s127 of the Corporations Act 2001 (Cth) (including electronic deeds), and 'split execution' under that section is not sufficiently reliable.
There was bipartisan support in the Parliament for extending relief on execution and meetings. But the sticking point appeared to be the provisions on liability in relation to continuous disclosure.
The Senate does not meet again to consider legislation until May.
It is not all gloom and doom.
In relation to electronic documents, as stated previously, an amendment late last year to the definition of 'document' in the Corporations Act makes the argument for electronic signing easier to sustain.
In some states there is some good news.
The Victorian Parliament has passed legislation (discussed previously) permanently introducing provisions
- that deeds can be electronic;
- allowing for split execution; and
- allowing remote witnessing (subject to various requirements).
In Queensland, a short bill has been introduced which will allow the Queensland Government to extend until 30 September the very comprehensive emergency regulations it has made allowing for electronic execution, split execution and remote witnessing. The Bill has been referred to a committee.
Where are we in relation to electronic signing and the Corporations Act?
The answer is that we have lost ground in terms of market acceptance. But there has been some possible progress.
Our own position before the COVID relief was:
- documents could be executed electronically under s127 of the Corporations Act, but others did not share that position, or were not sufficiently comfortable;
- there is some doubt as to 'split execution', where one director signs one counterpart, and another director or secretary signs another counterpart (in other words, they sign two separate pieces of paper). In light of one judicial dictum in one South Australian case, the general view is that this may not be safe;
- for deeds signed by companies under s127, our own view is that where the relevant state Electronic Transactions Act applied, the deeds could be signed electronically, but that was not the universal view: others disagreed. As a fallback we suggested that the documents be set up so a printout of an electronically signed document can be regarded as a signed original. Not all parties would accept this.
One silver lining should help to sustain the argument that documents can be signed electronically under s127. The definition of 'document' applying to the Corporations Act was significantly expanded by the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth). It remains to be seen whether that is widely accepted.
Also, s127 is not the only way companies can sign documents. For example, they can sign by attorney or authorised representative. The advantage of complying with s127 is that counterparties can assume due execution under s129(5) and (6).
Victoria goes permanent
The good news is that the Victorian legislature has passed the Justice Legislation Amendment (System Enhancements and Other Matters) Bill 2021. Among other things it expressly allows for electronic deeds, and for remote witnessing. Victoria has won the race for permanent reform in this area (though New South Wales achieved a reform allowing for deeds executed by individuals to be electronic).
The relevant provisions come into operation on 26 April 2021 (which is the same date the current temporary provisions are slated to expire).
Queensland looks to extend temporary relief
In Queensland, the Government has introduced a Bill, the COVID-19 Emergency Response and Other Legislation Amendment Bill 2021 (Qld), to extend the period in which temporary relief can operate from 30 April until 30 September.
That will allow them to extend the current Queensland regulations in relation to electronic execution, and reform of the law of deeds.3 The changes they make are a model of their kind – clear and effective – and we hope they become permanent.
What to do in relation to electronic execution by companies?
Electronic and remote signing under s127
As stated above, particularly since the amendment of the definition of 'Document' referred to above, our own view is electronic execution under s127 is effective. Nevertheless, other advisers may take a different view.
In brief, companies should do the following:
- Where the counterparty will have a concern as to how the document is executed, check that they will accept electronic execution under s127, including whether they will accept a printout.
- If they don't accept it, sign under power of attorney or (except in the case of deeds) by authorised representative, or move to modified split execution.
'Modified split execution' is where a document is sent to be signed by one director, that director then scans a printout of the document with his or her signature, and sends the scanned document to the other director or the secretary to print out the document (incorporating the first signature) and sign it. We understand that this is widely accepted.
At least for the moment, where you have a deed to be executed electronically by a corporation, provide that it is governed by Queensland or Victorian law, or be governed by New South Wales law and signed by an attorney.
Is there anything the Federal Government can do to extend the temporary relief?
We have checked the dates, and the section that authorised the Treasurer to modify the Corporations Act, s1362A, has reached its use-by date.
One step that would help in relation to s127 and electronic signing, but would come at it by a slightly different direction, is to amend the Electronic Transaction Regulations 2020 to remove ss127 and 128 from the exemption of the Corporations Act from the operation of the Electronic Transactions Act 1999. That may be practically difficult to achieve in a very short time.
26/02/21 - Late breaking news: extension of relief on virtual meetings and electronic signing hits a road bump
Last night the Federal Government Bill in relation to electronic execution, shareholder meetings and continuous disclosure hit a procedural road hump in the Senate. The Senate passed a resolution extending the date for the relevant Senate Committee to report on the Bill to 30 June. The Senate can’t consider the Bill until after then.
So unless Parliament does something by 21 March we roll back on that day to the pre-Covid position.
Parliament doesn't reconvene till 15 March. There needs to be pressure to fix it then somehow, but we may not be able to count on it happening.
This also affects virtual shareholders meetings.
In some jurisdictions the emergency temporary regulations in relation to electronic signing and remote witnessing, and their enabling acts, are expiring soon. The jurisdictions need legislation to extend the relief, or make it permanent.
The Federal and Victorian Governments have just introduced bills to do this.
While movement is in the right direction and welcome, overall progress in Australia is still very patchy — each state or territory is going its own way, if it is going at all. This table summarises the current position in Australian jurisdictions with respect to electronic signing and remote witnessing in relation to deeds and agreements.
Federal Government Bill
On 22 February 2021, the Treasurer announced the Government was extending the current temporary relief until 15 September 2021 in relation to:
- electronic execution of documents by companies under s127 of the Corporations Act 2001, and
- virtual meetings of shareholders in companies and of investors in managed investment schemes.
The current relief was achieved by a series of determinations by the Treasurer under emergency enabling legislation expiring on 21 March 2021.
The Government introduced a bill in Parliament effecting the announced changes. In addition, as also announced by the Treasurer, the Bill deals with directors' liability in relation to continuous disclosure.
The changes in relation to directors' liability will be permanent, with no expiry date. But the provisions with respect to execution and meetings expire on 15 September 2021.
For virtual meetings the Treasurer said the relief will expire on 15 September 2021, but announced a 12-month opt‑in period for companies to hold hybrid annual general meetings 'to enable a proper assessment of shareholder benefits of virtual meetings'.
In relation to electronic execution, he said the intention is to finalise permanent changes before 15 September.
The drafting of the Bill in relation to electronic execution is a bit different to the drafting of the Determinations and is developed from an exposure draft released in October 2020. It amends s127 of the Corporations Act (which sets out some ways in which companies execute documents) and s129(5) and (6) (which allow counterparties to assume companies have duly executed documents which appear to have been executed under s127).
In general terms the new language seems to do the trick. In particular:
- it clearly allows electronic execution by companies under s127 (which will get the benefit of the assumptions in s129);
- it allows remote witnessing of the affixation of a company’s common seal;
- it seems clear that it applies to deeds (not everyone in the market accepted that the Determination achieved this); and
- it allows 'split execution' (eg when two directors sign separate counterparts of a document).
One change that helps ensure the sections apply to electronic documents was made under amending legislation last year. The definition of 'document' applying to the Corporations Act was significantly expanded by the Corporations Amendment (Corporate Insolvency Reforms) Act 2020.
There are aspects of the drafting of the amendments in the new Bill that could be improved:
- It says a 'copy or counterpart of a document' can be executed electronically, but seems to assume there is still some separate original document. We will suggest further clarification is needed.
- It requires copies and counterparts to include 'the entire contents of the document'. This means when documents are emailed to be printed out and signed by a director, it may not be safe to simply print out and sign signature pages only. We have pointed this out before, but we gather this is a deliberate policy decision to ensure people are fully aware of what they are signing.
Further, the coverage is narrow. Sections 127 and 129 only apply to companies, not foreign or statutory corporations. In relation to deeds, this leaves a gap, as current state and territory legislation dealing with the execution of deeds commonly excludes corporations.
Victoria is first off the blocks in proposing legislation to achieve permanent reform.
On 17 February 2021 it introduced a bill that, among other things, provides expressly:
- that deeds and mortgages can be electronic;
- for split execution (ie with signatories signing separate counterparts of documents), and
- for remote witnessing or making of instruments such as powers of attorney, affidavits, statutory declarations and the like.
In relation to electronic execution and remote witnessing of contractual documents, the drafting is broadly consistent with the approach adopted in the current emergency regulations introduced by the Victorian Government. In this respect, the Bill operates by amending the Electronic Transactions Act 2000 (Vic).
The relevant provisions are clear and should be accepted by the market as achieving their aims. There are a number of procedural requirements in relation to remote witnessing of contractual documents, though these are simpler than some requirements in other states. These are set out in the proposed s12(2) to be inserted in the Electronic Transactions Act.
One difficulty with such requirements is if they are not satisfied the document may be invalid. A party relying on that document may not be able to check that some of the requirements are satisfied. In particular, the proposed s12(2)(b) goes to the state of mind of the witness. It requires that 'the witness must be reasonably satisfied that the document signed as a witness is the same document or a copy of the document'.
Paragraph (e) requires a statement by the witness that all the requirements of the section have been met. It would be very helpful if the Bill provided that other parties may rely on that statement in the absence of notice or suspicion to the contrary.
In relation to deeds the Government has missed the opportunity of following the example of the Queensland temporary regulation in reforming a number of aspects. In particular, the law should provide that foreign and statutory corporations can execute deeds through their officers signing, without a common or official seal. Without that change they may have difficulty executing deeds electronically. And the requirement that a deed is necessary to authorise an agent to execute a deed could usefully be removed.
The New South Wales position
It is worth bringing this site up to date in relation to New South Wales. In September 2020, New South Wales passed an act effectively extending the then current temporary relief to have remote witnessing, as a pilot scheme to expire on 1 January 2022. It did this by repealing the relevant emergency regulation and replacing it with amendments to the Electronic Transactions Act 2000 (NSW) to expire on that date.
New South Wales has not introduced any new legislation in relation to electronic deeds. There is still a gap in New South Wales relating to deeds signed by statutory and foreign corporations. Before the pandemic, it had introduced s38A of the Conveyancing Act 1919 (NSW) expressly providing that individuals can sign deeds electronically. This includes where the individuals are signing as attorneys for corporations. If the Federal Government Bill is passed into law, companies incorporated in Australia will be able to execute documents electronically under s127. That still leaves statutory and foreign corporations except where an attorney is signing for them.
New South Wales needs to legislate to clarify that all deeds can be electronic and, we suggest, following the Queensland example in a number of other respects, including removing the requirement that the execution of deeds be witnessed.
Under its emergency legislation, the Queensland Government has introduced a temporary regulation dealing with requirements for deeds, general powers of attorney and mortgages, and the electronic signing and remote witnessing of statutory declarations, affidavits, wills and enduring powers of attorney (the Justice Legislation (COVID-19 Emergency Response—Wills and Enduring Documents) Amendment Regulation 2020).
It's extremely welcome, particularly in relation to that old bugbear – deeds.
Queensland now the preferred governing law for deeds — deeds can be electronic
The Regulation makes sweeping reforms of the law relating to deeds, removing many of the difficulties, and it is drafted plainly and clearly.
While this is temporary, there is some hope that much of it may become permanent as a number of points reflect a report prepared by Queensland University of Technology on the Property Law Act (others reflect concerns that we have raised).
The clarity of the changes should remove any doubts about electronic deeds in Queensland. Those looking for reasons why deeds governed by Queensland law cannot be electronic should find the challenge insurmountable. This includes Queensland law deeds signed under section 127 of the Corporations Act 2001 (Cth).
Among other things the regulation expressly:
- allows a deed to be made or signed electronically (and removes the requirements for a deed to be made on paper or parchment);
- allows a deed to be signed without a witness;
- removes the requirement for a deed to be sealed or deemed to be sealed; and
- allows any corporation to sign deeds (without a seal) by two directors, a director and a secretary, or a sole director and secretary (this is consistent with s127 of the Corporations Act) and to sign deeds in any other manner allowed by law.
The above includes foreign corporations and statutory corporations incorporated anywhere in Australia.
In addition, it:
- allows foreign corporations to sign according to the law of their place of incorporation and statutory corporations to sign according to their statute;
- allows a deed to be signed by split execution and in counterparts; and
- allows an agent to sign a deed even where the agent has not been appointed under seal.
It does require:
- a deed to be in writing and contain a conspicuous statement indicating that it is executed as a deed;
- a deed to be delivered as under existing law (note this can be done without physical delivery); and
- electronic signatures to satisfy tests as to identity and reliability similar to the electronic transactions legislation and similar emergency legislation in other jurisdictions (but it does not require the other party's consent to electronic signature). These tests are generally easily satisfied.
It does not expressly deal with partnerships.
In general, this makes Queensland the most favourable governing law for deeds during the temporary regime, followed by Victoria, then New South Wales.
General powers of attorney
Similar changes are made for general powers of attorney.
The Regulation provide that certain mortgages of land can be created electronically and registered.
On electronic signing, the Regulation allows for electronic signing and remote witnessing by audiovisual means of affidavits, statutory declarations, enduring powers of attorney and wills.
There are procedural requirements for audiovisual witnessing, and only limited classes of people (such as lawyers etc) may act as a witness by audiovisual means.
The remote witnessing requirements are similar to those introduced in New South Wales but require qualified witnesses like legal practitioners. That is less of a concern, as under the Regulation witnessing is no longer a requirement for deeds and powers of attorney (and affidavits and statutory declarations already require qualified witnesses).
Under its COVID-19 emergency legislation, Victoria has introduced temporary regulations allowing for:
- the electronic execution of deeds and mortgages;
- the remote witnessing of documents effecting transactions; and
- the electronic execution and remote witnessing of powers of attorney, wills and statutory declarations (but not affidavits, which are covered in the emergency legislation itself).
The Regulations will expire on 24 October.
There are a number of points to note.
Electronic deeds OK
The provisions allowing electronic deeds (sections 5 and 6) operate by modifying the Electronic Transactions Act 2000 (Vic) but are clear — and should be sufficient to convince the most crusty die-hard. They apply whether the deed is signed by an individual or a corporation. This makes Victorian law a very attractive governing law for executing deeds. They don't need to be witnessed. They can now be electronic.
The provisions also apply to mortgages.
Electronic split execution OK, with procedural requirements
There is specific provision modifying the Electronic Transactions Act 2000 (Vic) to allow signatories required to sign the same document to sign different counterparts of the same document electronically (section 12). There is a procedural requirement that every signatory and every other party receives every electronically signed copy.
This provision may not have affected the issue whether section 127 of the Corporations Act 2001 can be satisfied by split execution, but the recent Determination by the Federal Treasurer has solved that for now.
Counterparties might not be able to reject electronic signatures
The Regulations provide that the fact that a party proposes to sign electronically in a manner otherwise complying with the relevant requirements of the Victorian Electronic Transactions Act is not of itself sufficient reason for other parties to refuse the consent required under that Act to that electronic signature (section 11).
Signing documents (including deeds) electronically under power of attorney — a procedural trap for the unwary?
Perhaps unnecessarily, the Regulations say expressly that attorneys can sign documents electronically where the attorneys include a statement they are signing under the Regulations (section 35(2)). We were not aware of any doubt on that score.
What happens if an attorney now signs electronically without such a statement? Do we now need the statement? Is this a trap for young players (and old ones)?
In our reading, the Regulation should not limit the way documents can be signed — section 35(2) is inclusive, so generally documents should still be able to be executed electronically by an attorney without the statement where there is no other impediment. But where a document is executed during the currency of the Regulations by attorneys and Victorian law is relevant, for more abundant caution, it would be useful to include such a statement where feasible.
Audiovisual witnessing with few procedural requirements
The Act also provides for a mechanism for documents to be witnessed by audiovisual means.
In Victoria this does not apply generally to deeds, which do not need to be witnessed.
There are not as many requirements to be satisfied as there are in the New South Wales equivalent regulation, but the witness does need to state he or she is witnessing by audiovisual link in accordance with the Regulations.
06/05/20 - Treasurer modifies the Corporations Act to permit remote meetings and signing of documents
I am delighted to say that the Treasurer has introduced changes to the way companies can sign documents. The 'cautious optimism' I expressed in earlier emails after dealings with Treasury on the subject was not misplaced.
Using his power under emergency legislation, the Treasurer has issued a statutory instrument modifying the Corporations Act 2001 for a period of six months to provide for:
- the electronic execution of documents by companies, and
- general meetings and other meetings to be held remotely.
Signing documents in a pandemic
The instrument modifies sections 127(1) and 129(5) of the Act.
- allows documents to be signed by companies under s127(1) electronically, so that two directors, a director and a secretary, or a sole director and secretary can sign in that way
- provides for 'split execution' where the relevant officers of the company sign separate counterparts (physical or electronic), and
- modifies the assumption in s129(5), so that parties dealing with companies may assume a document has been duly executed if it appears to have been executed under the modified s127(1).
This is a considerable advance. As we have previously noted, there has been widespread uncertainty as to whether this could be done. This has proved to be an enormous impediment during lockdown to the extent that, in some cases, parties have felt they need to get documents physically signed, despite the isolation.
As to what would constitute electronic signing, it tracks the language of the Electronic Transactions Act, including the tests as to identity and reliability. The language may look a little awkward in this context, but the tests in the ETA have been interpreted liberally by the courts (see my paper here). They should accommodate most common methods of electronic signing, generally without any other step. With 'pasting' of a copy of a signature into a document (not using an electronic signing platform or a stylus etc) in some circumstances it may be prudent to have evidence it was pasted by or with the authority of the signatory.
The modification does not expressly refer to s127(3) and deeds. In our view, it should allow electronic execution of deeds, but it remains to be seen whether others are convinced.
Corporate and creditors' meetings
The modification allows for all meetings provided for under the Act, the Regulations, the Insolvency Practice Rules and the Passport Rules to be held remotely by technologies that give all persons a reasonable opportunity to participate.
This will cover, for example, general meetings, scheme meetings and creditors' meetings. Notices of the meeting may be given electronically, proxies may be given electronically and votes may be taken using various technologies.
A copy of the official document from Treasurer, Josh Frydenberg, can be found here.
30/04/20 - Progress in Victoria on enabling electronic execution, and on remote witnessing of affidavits
The Victorian Parliament has passed its emergency legislation, the COVID 19 Omnibus (Emergency Measures) Act 2020. It is the latest legislature to give the executive broad powers to amend legislation temporarily (the others being the Federal Government, Queensland and New South Wales).
Section 4 allows the Victorian Government by regulation to modify or disapply any legislation administered by the Attorney General in relation to a wide range of issues. These include: the witnessing, execution or signing of legal documents such as affidavits, statutory declarations, deeds, powers of attorney, contracts or agreements, undertakings and wills; and also the process by which a document is given or issued.
That provision gives broad power to deal with the issues that have been concerning us, in particular, the creation of electronic deeds.
In addition, the Act provides for the remote witnessing of affidavits by audiovisual link, and the electronic execution and attestation of affidavits.
Green shoots on legislation or regulation in various states
Various states have circulated for comment, or are considering, their own proposals for emergency enabling legislation or for regulations concerning remote witnessing and/or electronic signature. We have made suggestions.
Electronic land dealings accepted in New South Wales
From 27 April, the NSW Conveyancing Rules, the Conveyancing Rules - (COVID-19 Pandemic) Amendment, have been temporarily amended to allow for land dealings to be signed electronically and for copies of the electronically signed dealings to be registered.
This follows the issue of the Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020, which provides for witnessing via audiovisual link during the pandemic (see below). Both amendments will cease to apply on 23 October 2020 (subject to earlier repeal by Parliament).
The amendment to the Conveyancing Rules allows parties and witnesses to electronically sign land dealings, certain certificates and instruments lodged with deposited plans.
Anyone who signs electronically must confirm their identity and their intention to sign electronically by either:
- including a statement near or above their electronic signature, or
- using a digital signing platform that indicates on the instrument that an electronic signature was applied, and the date and time that this occurred.
The Office of the Registrar General has advised that these temporary changes do not alter any existing requirements for execution and certification, verification of identity or establishing the right to deal. It has published a Guidance Note on executing NSW paper land dealings during COVID-19 restrictions, providing further information as to how these steps can be completed for paper dealings during the pandemic.
Where electronic signing is chosen, the guidance says electronic signatures must comply with the requirements of Division 2 of Part 2 of the Electronic Transactions Act 2000 (NSW).
Still waiting for Commonwealth modifications of the signing provisions of the Corporations Act
We were cautiously optimistic after earlier discussions, but there has as yet been no apparent movement. The responsible minister is the Treasurer, who has an extraordinary amount on his plate.
That said, the Treasurer is placing pressure on the banks to accelerate loan transactions. But among the difficulties they face in doing so are the barriers and uncertainties relating to electronic execution of loan and security documents by companies — barriers and uncertainties he could remove quite simply, using powers granted under the emergency legislation.
In the absence of the Federal Government dealing with those issues, there are some steps the states can take to assist. The states in their regulations could expressly allow for electronic deeds, and for deeds to be signed without a seal by two directors or a director and a secretary. That would be of considerable assistance, though without all the advantages of a solution by the Federal Government. We are suggesting that be done.
23/04/20 - Progress in New South Wales on remote witnessing, but 'wait and see' on electronic deeds and electronic attestation
The NSW Government has released under its emergency power a regulation concerning remote witnessing – Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 (the Regulation).
It follows the consultation draft referred to in our earlier email, but only in part.
In broad terms, the Regulation allows for the remote witnessing of documents, which is a big step forward. It will be welcome in a wide range of fields, including litigation.
However, the consultation draft of the Regulation had also dealt with the electronic execution of deeds, and electronic attestation of electronic documents. These were not included in the final version. The Government said: 'We are continuing to consider reform options for electronic signature and execution of documents that are currently required to be prepared in hard copy'.
The Government is conducting a new round of consultation and consideration on those topics and has already kicked it off in an email to stakeholders. The intention is to complete it quickly.
The Regulation provides that:
- documents that require a witness may be witnessed by audio visual link but there are a few requirements as to how this may be done that need to be fulfilled;
- tasks in relation to witnessing a document may be performed by audio visual link;
- written oaths, declarations or affidavits required for a purpose specified in section 26 of the Oaths Act 1900 may be taken or made before an Australian legal practitioner; and
- a statutory declaration may be made before a person before whom a statutory declaration under the Statutory Declarations Act 1959 of the Commonwealth may be made.
The Regulation will expire on 26 September 2020, unless this date is changed by further regulation or a resolution of Parliament.
The Regulation did not remove the exclusion of witnessing from the operation of certain provisions of the Electronic Transactions Act 2000 (NSW). Our view is that, despite this, documents signed electronically can be witnessed and witnesses can sign electronically, but it remains to be seen how many hold that view. Legislative certainty is likely to be necessary.
As mentioned above, in terms of reform this is not the end of the line. We understand that the difficulty with extending electronic execution was that there may be some who are concerned about risks, and so the Government has decided to have a deeper look.
Understandably, there may be some resistance among certain stakeholders to electronic documents. There needs to be continued impetus to achieve the necessary changes so there is certainty in the market that corporations can create electronic deeds and that witnesses etc can sign electronically, and electronic signatures can be witnessed.
New Queensland emergency legislation gives sweeping power to amend the law relating to documents
The Queensland Parliament has passed new legislation: the COVID-19 Emergency Response Act 2020. Section 9 gives the Government the power by regulation to change statutes or common law relating to documents, including their preparation, signing, witnessing, registration and verification of identity. It is the most sweeping power of the various jurisdictions. Watch this space.
For the more information on some of the questions you may have in regards to signing documents in a pandemic please click here.
Treasury Laws Amendment (2021 Measures No. 1) Bill 2021
Corporations (Coronavirus Economic Response Determination (No. 3) 2020 under s1362A Corporations Act 2001 (Cth).
Allens, Ashurst, King&Wood Mallesons, Herbert Smith Freehills and Norton Rose Fulbright, named from the line " 'The time has come' the Walrus said 'to talk of many things' "
Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth)
Justice Legislation (COVID-19 Emergency Response – Documents and Oaths) Regulation 2020 (Qld).
Justice Legislation (COVID-19 Emergency Response—Permanency) Amendment Bill 2021 (Qld).