Temporary Relief: The ‘temporary’ return of e-signing & split execution for corporations

Published: 16 August 2021

Written by: John Momitsas

On and from 14 August 2021, corporations once again will be permitted to electronically execute documents as well as sign documents via ‘split’ execution (i.e. the signatures of both directors or the director and company secretary are no longer required to appear on the same page) in compliance with section 127 of the Corporations Act 2001 (Cth) (the Corporations Act), as was the case last year, but ceased to apply on 21 March 2021 (as set out in our June article).  

On 10 August 2021 both Houses of Parliament passed and Royal Assent was provided on 13 August 2021, enacting the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (the Act). 

The Act is only a temporary measure, as these changes are due to expire on 31 March 2022. 

Effect on section 127 of the Corporations Act regarding e-signing and ‘split’ execution 

The Act amends section 127 of the Corporations Act, by inserting two new sections which deal with electronic execution and ‘split’ execution.  

E-signing  

The new section 127(3B) of the Corporations Act provides that a document is taken to have been signed by a person if:  

• a method is used to identify the person and to indicate the person’s intention to sign a copy or counterpart of the document; and 

• the copy or counterpart includes the entire contents of the document; and 

• the method used was either:
  • as reliable as appropriate for the purpose for which the document was generated or communicated, in light of all the circumstances, including any relevant agreement; or  
  • proven in fact to have fulfilled the functions described in the first bullet point above, by itself or together with further evidence. 

‘Split’ execution  

The new section 127(3C) of the Corporations Act provides that a copy or counterpart of a document need not include: 

• the signature of another person signing the document; or  

• any material included in the document to identify another person signing the document or to indicate another person’s intention in respect of the contents of the document; or  

• if a common seal is fixed to the document – the seal.  

The above changes in turn will now grant a counterparty to a document the right to rely on the benefit of the due execution assumptions provided under section 129 of the Corporations Act. 

Further, electronic execution platforms such as Adobe Sign and DocuSign may once again be utilised by corporations with certainty to enable the management of execution of documents and therefore facilitate the closure of transactions promptly.  

Moving forward: From temporary relief to future certainty  

The Government has pledged to introduce permanent reform to this highly debated and sought after topic, and we hope this time around they do so prior to the expiry of these latest changes. 

Once again, we along with most corporations within Australia, will be waiting in anticipation to find out whether these welcomed changes will be made permanent by the Government to avoid the reversion (once again) to ‘wet ink’ and same page execution requirements.