The Treasurer has made a determination permitting companies to hold online meetings and allow directors and secretaries to execute documents electronically [and in split execution or on separate pieces of paper].
This was implemented on 6 May 2020 as a response to the current COVID-19 pandemic and will apply on a temporary basis until 6 November 2020 [the Determination].
Below is a summary of the mechanisms:
New methods of executing company documents
The Determination outlines that the following methods of execution are now legally permitted for companies:
1. Electronic execution – directors and secretaries may now execute company documents electronically.
The explanatory memorandum of the Determination identified the wide variety of means by which officers of a company may utilise this new approach, such as:
- Pasting the signature into the document;
- Signing a PDF document on a tablet, smartphone or laptop [using a finger or stylus]; or
- Using signature platforms such as DocuSign.
2. Split execution – directors or secretaries of a company may physically sign [with a pen on paper], different copies of the same document.
3. Electronic split execution – when one director or secretary of a company physically signs [with a pen on paper] the document, then scans and emails the document to the other officer. The second officer then prints the document and physically signs the document.
To comply with the new execution methods, the director or secretary must be identified in the document. This could be as simple as ensuring full legal names are evidenced in the document.
How is this different to normal?
Whilst electronic signing is already common, many are unaware that it is usually problematic for companies to sign documents this way. The reason is that the presumption of due execution provisions in the Corporations Act [Section 129 of the Corporations Act] does not apply to electronic signing – and on this basis, third parties cannot assume that a document purporting to have been signed by officeholders of the company is actually valid.
This issue is avoided [at least temporarily] by the Determination.
The Determination only applies to the signing of documents by companies and does not affect the existing rules regarding the electronic signing of documents by individuals [which is relatively common except that some documents can never be signed in this way, for example, deeds where a witness is required].
In relation to powers of attorney and wills, there are separate temporary arrangements [relating to electronic witnessing] in place as a result of the COVID-19 pandemic.
How can meetings now be held?
Companies that are required or permitted to hold meetings [including shareholder meetings], may now be convened entirely online.
The meeting must allow all participants an opportunity to speak, and any voting is to be completed on a poll [not a show of hands].
Notice of an upcoming meeting must still be provided to all participants with the relevant information. However, the temporary changes now allow the option to email the notice directly to participants.
The changes are welcome [if not already a bit behind the times] and aim to simplify and ease the way companies run meetings and sign documents during the current pandemic. If you would like any assistance on ensuring your company electronically executes, or holds online meetings correctly, please do not hesitate to contact us.
Information provided on this website is general in nature and does not constitute financial or legal advice. Every effort has been made to ensure that the information provided is accurate, but information may become outdated as legislation and new government announcements are made. Individuals must not rely on this information to make a financial, investment or legal decision as it does not take into account their personal circumstance. Before making any decision, we recommend you consult a licensed advisor or legal practitioner to take into account your particular objectives, circumstances and individual needs.