Signing legal documents

• What are the rules surrounding execution and witnessing of legal documents?

What are the rules surrounding execution and witnessing of legal documents?

There are different requirements for the execution of legal documents depending on who is signing the document: whether an individual or a company, and if a company, what its structure is.

The requirements also differ between Australian jurisdictions, so the answers below give a general response which addresses those requirements.

Companies signing legal documents

A company can execute a document in any way that it determines, including authorising a person to sign the document on the company's behalf. The form of execution needs to be supported by either a provision in the company's constitution or a resolution of the company's board.

However, some organisations who deal regularly with companies (including some banks such as the National Australia Bank (NAB)) require that legal documents be executed in accordance with section 127(1) or 127(2) of the Corporations Act 2001 (Cth) (Act). This is because those organisations can then rely on assumptions set out in section 129 of that Act that the document has been executed properly. They don't need to verify who has executed the document. This requirement is a problem for some sole director companies. We discuss this below.

A company can execute a document in compliance with sections 127(1) or (2) of the Act:

• without using the company seal by:

  • 2 directors signing it;
  • a director and the company secretary signing it; or
  • if the company has a sole director who is also the sole company secretary, that person signing it; or

• by affixing the common seal to the document in the presence of the following persons who must also sign the document as evidence that they witnessed the affixing of the seal:

  • 2 directors;
  • a director and the company secretary; or
  • if the company has a sole director who is also the sole company secretary, that person.

None of the above options accommodate a sole director company that does not have a company secretary. Such a company cannot, therefore, execute documents in accordance with either section 127(1) or 127(2) of the Act.

Section 126(1) of the Act allows an individual acting with the express or implied authority of the company to make, vary, ratify or discharge a contract. However, the other party to the contract still cannot rely on the assumptions in section 129 of the Act and so they may require some further step, such as providing a copy of a resolution of the sole director authorising the person to sign the document on the company's behalf.

Individuals signing legal documents

The requirements for individuals in relation to signing legal documents vary slightly from State to State. To keep things simple, as a general rule a witness to the execution of a legal document should:

• be 18 years old or older;
• know the person whose signature they are witnessing;
• be satisfied as to that person's identity;
• not be a party to the document , that is, they should be signing the document only as a witness.

If the document is a trust deed, or an SMSF deed, then in addition to the above, the witness should not be a beneficiary of the trust or fund.

Electronic signatures

Commonwealth and state and territory laws are not all that accommodating of electronic signatures. Despite the growth of e-commerce, the norm for signing formal legal documents — such as contracts and wills — remains a handwritten signature on paper.

You can read more about electronic signing of legal documents in our ClearLaw article "Electronic signatures: when are they effective?".