Update & Snapshot: Electronic Execution – Embracing the future

Next month (August 2021), the Senate are scheduled to resume their debate as to whether to pass the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021, which would permit the legal execution of an electronic copy of a document by corporations.

Electronic execution during the COVID-19 period

The COVID-19 pandemic, social distancing and restrictions on people’s movements caused (and continue to cause) a number of issues and delays in having physical documents signed.

To assist in overcoming these hurdles, the Treasurer made a determination to modify the Corporations Act 2001 (Cth) (the Corporations Act) to allow company officers to sign a document electronically for the purposes of section 127 of the Corporations Act.

Unfortunately, these temporary changes expired on 21 March 2021, which has necessitated a reversion to physical signing of documents.  This impedes swift resolution to transactions.

Section 127 of the Corporations Act 2001 (Cth) – As it currently stands

The execution of documents by corporations is governed by the Corporations Act, which does not by itself provide for electronic signing. Although the Electronic Transaction Act 1999 (Cth) permits transactions to occur electronically, it specifically excludes the Corporations Act.

Section 127 of the Corporations Act allows corporations to execute a document (without a common seal) if executed by two directors, a director and a company secretary, or a sole director/company secretary. A counterparty to a document may rely on the benefit of the due execution assumptions provided under section 129 of the Corporations Act, if execution under section 127 of the Corporations Act was found to be invalid.

Stanley J in obiter in Bendigo and Adelaide Bank Limited & Ors v Kenneth Ross Pickard & Anor [2019] SASC 123 explored and commented on the validity of electronic execution and split executions, whereupon it was concluded that the interpretation of section 127 of the Corporations Act requires a corporation to execute a single, static physical document.

Prior to COVID-19, corporations have generally in practice taken the prudent approach when executing documents under section 127 of the Corporations Act by signing with wet ink signature only.

The future of electronic execution 

Although corporations enjoyed utilising electronic execution for the greater part of last year, unfortunately we all have had to wait since March 2021 for a decision to be made whether such technological capabilities can be utilisable once again.

We, along with most corporations, will be waiting in anticipation to find out the Senate’s position on the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021, and what the future holds for electronic execution in Australia.