Electronic Execution by Company Signatories: The Future is (Finally) Here

Amendments to the Corporations Act 2001 (Cth), which came into effect earlier this year, clarified the rules surrounding electronic execution and permitted company signatories to sign documents (including deeds) using electronic means. The new rules allow companies to use a variety of methods to execute legal documents, including electronic signatures, split execution, and execution through an agent.

This article summarises the changes and provides practical guidance for company signatories interested in signing documents in electronic form and by electronic means. We also cover some of the execution difficulties that remain outside the corporations framework, and what individual signatories (including directors) must consider before signing electronically.

New provisions to accommodate electronic signing

Valid execution of legal documents by electronic means has been the bugbear of Australian lawyers for as long as digital signatures have been in existence. The rules around when a document can be executed electronically varied from state to state, agreement to deed, and corporation to natural person.

The COVID-19 pandemic prompted the federal and state governments to introduce a range of temporary measures to accommodate remote working, including permitting electronic execution of legal documents.

The temporary measures were positively received by the legal community and, on 23 February 2022, the Corporations Act was amended to permanently allow companies to execute documents (including deeds) using electronic means and in electronic form.

Key features

Electronic signatures

The new provisions allow companies to execute documents (contracts and deeds) using either wet-ink signature or electronic means.

For example, a company may now execute a document by having two directors, a director and a company secretary, the sole director, or the sole director and company secretary apply their signatures electronically on the document. Alternatively, an agent with the company’s express or implied authority may execute a document on behalf of the company by applying their signature electronically on the document.

Execution by agent

A company may now appoint a person to execute documents (including deeds) on its behalf as agent without having to appoint the person by a deed.

However, the agent must still have express or implied authority from the company to sign documents on its behalf. As such, companies ought to obtain a copy of the authority appointing the agent if a counterparty is seeking to execute a document through an agent.

Split execution

The new provisions further provide that when a company executes a document under the Corporations Act, company signatories may validly execute the document without having to sign on the same copy or on the same page of the document as the other signatories, and do not need to use the same signing method as the other signatories.

In practice, this means a document may be validly executed if all signatories each sign an identical copy of the document, even if the signatures don’t all appear on the same document, and even if each signatory uses a different signing method (electronic or wet-ink).

Companies can now deploy split execution or execution in counterparts when signing documents with confidence.

Remote witnessing

If a company wishes to execute a document using its common seal, the fixing of the common seal may now be witnessed remotely using electronic means. When witnessing the fixing of the common seal remotely, it is important that:

• the witness and the person affixing the common seal clearly appear before each other by audio-visual link;
• the witness identifies the document being executed;
• the witness sees the face and hands of the person while that person fixes the common seal; and 
• the witness signs the document (electronically or in wet-ink).

Difficulties that remain

Whilst the recent amendments to the Corporations Act should provide reassurance to companies when executing documents electronically, a few uncertainties remain.

Not all states and territories allow e-signing

Not all Australian jurisdictions permit e-signing of deeds. Only Victoria, New South Wales and Queensland (e-signing jurisdictions) currently have legislation in place enabling natural persons to sign deeds by electronic means. Where a deed is governed by laws other than those of the e-signing jurisdictions, and the counterparty is not a relevant company under the Corporations Act, the deed will still need to be signed in wet-ink.

Corporations Act companies only

Relevantly, the amendments only apply to companies incorporated under the Corporations Act. For other entities such as incorporated associations or overseas companies, electronic execution of documents (particularly deeds) may be governed by state or territory legislation, or laws of another jurisdiction. As such, if the counterparty is an entity other than an Australian company, legal advice should be sought to ensure the proposed method of execution is valid under the relevant laws governing the document.

Caution required when companies signing by Agent

Further, it is unclear whether the new rule that an agent may execute a deed without a witness overrides certain state and territory laws requiring deeds executed by natural persons to be witnessed. Again, companies should seek legal advice where there is uncertainty.

Internal governance rules still apply

Finally, it is best practice to always ensure that when signing on behalf of a company, internal governance rules, including the company’s constitution, are properly observed.

Impact on Cleardocs

Cleardocs products affected by the changes include any document under which an Australian company is a signatory (either agreement or deed), for example:

• Division 7A Loan Agreement
• Shareholders Agreement
• Confidentiality Agreement (Deed)
• Service Agreement
• Employment Contract
• Trusts – Corporate Trustee

More Cleardocs information on related topics

You can read earlier ClearLaw articles on a range of matters here.

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.