E-signing? Time for a refresher on electronic execution

Over the past year e-signatures have become the norm for executing legal documents. Since amendments to the Corporations Act 2001 (Cth) (Corporations Act) were made in response to the COVID-19 pandemic, 'wet ink' signing is becoming a thing of the past as many people appreciate the convenience of signing documents electronically. However, the uptake in electronic execution has not necessarily been accompanied by a corresponding increase in understanding of the rules governing the practice. The use and validity of methods of electronic execution is often misunderstood and misapplied. The source of much of this confusion is the overlapping, and sometimes complex, rules which apply to the use of electronic execution across various Australian jurisdictions and different types of documents. For example, whilst a company registered under the Corporations Act (Australian Company) has the benefit of unified rules following the recent amendments, those rules do not apply to other legal entities. In addition, not all states and territories allow e-signing of deeds. The consequences of executing a document incorrectly can be significant and, in some cases, will call into question the validity of an agreement or legal arrangement intended by the parties. This article sets out a succinct overview of when and where electronic execution of agreements and deeds is accepted and provides guidance on the some of the scenarios where signatures must be in wet-ink.

Executing an agreement in Australia: Electronic execution is generally permitted

Generally, an agreement may be e-signed in Australia where the party to it is an individual, an Australian Company or some other Australian entity.

A foreign entity may also e-sign an agreement in Australia but only if that method of signing complies with execution requirements applying to that entity under the applicable foreign law and its constituent documents (obtain advice from foreign counsel about this).

When executing an agreement, there are only limited circumstances where signatures must be witnessed.

Executing a deed in Australia: Whether electronic execution is permitted depends on who the party is, and the proper law of the deed

When considering whether a deed may be electronically executed by a party in Australia, it is helpful to consider the following:

• Is that party an Australian Company, or another entity?
• If that party is an entity other than an Australian Company, what is the proper law of the deed (having regard to its governing law and expected place of enforcement)?

Where an Australian Company is executing a deed in Australia

Where the party executing a deed in Australia is an Australian Company, it is permitted to electronically execute the deed under the Corporations Act.  There is no specific platform that the Australian Company will need to use for signing. However, the method of signing must satisfy the requirements of the Corporations Act. These requirements include that the method of signing must:

• identify the person signing; 
• indicate the person’s intention in respect of the information in the document; and
• indicate that the method was either as reliable as appropriate for the purposes or proven in fact to have fulfilled the person’s intention.

It is helpful to note, that where there are multiple signatories, they can use different methods of signing and are permitted to sign in counterparts. 

Where an entity other than an Australian Company is executing a deed in Australia

In these circumstances, the entity must sign in wet-ink, unless the proper law of the deed is that of:

• Victoria;
• New South Wales; or
• Queensland.

This applies to an individual, a government body, an incorporated association, a partnership and a foreign company (even if it has an Australian Registered Body Number).
When executing a deed it is prudent to note that the document is executed as a deed, and use words to the effect that the deed is signed, sealed and delivered. 

When is witnessing required?

Agreements
Where an agreement is being e-signed or wet signed in Australia, there is no general legal rule which requires signatures to be witnessed, subject to:

• a party’s requirements under its policy (for example, lenders may require a borrower or guarantor’s signature in a loan agreement to be witnessed); or
• legislation which expressly requires certain documents to be witnessed (for example, under the Conveyancing Act 1919 (NSW)).

Deeds
Where a deed is being e-signed or wet signed in Australia by an individual or an attorney (under a power of attorney), it is best practice to have the signature witnessed.  In limited circumstances, this is not strictly required, but witnessing of deeds is recommended particularly if you are the party taking the benefit of the deed, mainly for evidentiary reasons in case a dispute arises later. 

Other common documents that can be signed electronically

There are many documents that companies are required to sign under the Corporations Act that are not agreements or deeds. For example:

• consent to act as company director; 
• circular resolutions; and
• minutes of meetings.

Each of these documents can be executed electronically irrespective of whether the signatory is an individual or company, or whether the proper law of the document is a state that permits e-signing.

Consequences if electronic execution is incorrect 

If an agreement or deed is incorrectly executed, and there is a challenge to the document’s validity, then it may be deemed unenforceable and any obligations or arrangements which were created by the document will not be protected.  

If you are unsure about how to sign a document, it is best to obtain legal advice before signing. 

More Information from Maddocks 

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Corporate & Private Clients Practice Group.

More Cleardocs information on related topics

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