Signing 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, that person signing it provided they are the company's sole secretary, or the company does not have a secretary 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, that person provided they are the company's sole secretary, or the company does not have a secretary.

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

Laws in relation to electronic execution of documents in Australia vary according to State and Territory and in respect of different types of documents (e.g., agreements and deeds), so it is important to seek legal advice to ensure that electronic execution is suitable in your given circumstances.

However, generally speaking, if an Australian company is executing a document under section 127 of the Act it is able to execute the document electronically.

With certain types of documents such as trust deeds, some organisations such as financial institutions may prefer wet-ink signatures. Accordingly, if you are seeking to have third parties accept the documents it is important to confirm whether they have any execution requirements in advance. For example, although electronic execution may be permissible at law, certain of Australia's Big 4 banks still insist on trust deeds being executed in wet ink.

If you choose to execute a trust deed electronically it is also important to ensure you are aware of the State in which the trust is taken to be formed (and, therefore, where duty may be payable in respect of the trust). By way of example only, section 58(2A) of the Duties Act 1997 (NSW) sets out the circumstances in which a trust deed executed electronically will be taken to be executed in New South Wales which will include where NSW is the location of the trustee's registered office, registered business address or principal place of business. Again, it is important to seek legal advice on this point if you have any uncertainty in relation to the effect of electronically executing documents.

You can read more about electronic signing of legal documents in our ClearLaw article "E-Signing? Time for a refresher on electronic execution?".

Our entire document suite on demand

With a wide range of documents, Cleardocs is the most comprehensive document suite available - all in one place. You can be confident that our documents are current and compliant, with compliance upgrades to popular documents just a few clicks away.