Corporations Act Reform: Sole Directors and Electronic Signing
The Corporations Amendment (Meetings and Documents) Act (Cth) 2022 (Amending Act) came in to effect on 1 April 2022, with two notable reforms made which affect the way directors execute documents on behalf of companies.
Executing Documents – Sole Directors
The Amending Act has dispensed with the old provisions of section 127(2) of the Corporations Act 2001 (Cth) (Act), which required a sole director of a company to also hold the position of the company secretary in order to validly execute documents on behalf of the company.
The previous provisions were seen by many practitioners as problematic, as they had the potential to lengthen the process of executing a document if the sole director of a company was not also the secretary of that company. Previously, a sole director was also required to be appointed as a secretary of the company to validly execute a document, notify ASIC of the appointment, and wait for an ASIC extract to be updated to reflect the appointment.
This amendment now provides much needed time efficiency by allowing sole directors to execute a document in their capacity as a sole director if the company has not appointed a secretary.
Executing Documents – Electronic Signing
The Amending Act also introduces “Technology Neutral Signing”, which also affects the provisions relating to the execution of documents on behalf of companies found under section 127 of the Act. The Amending Act now allows an individual to execute a document on behalf of a company physically by hand, or via electronic means without utilising a paper document.
The Amending Act further allows for signing to be conducted via two separate methods on the one document. For example, one party may digitally sign while the other party physically signs the same document. This amendment is a historic move toward the acceptance of technologically assisted signing in the legal sphere.
The addition of “Technology Neutral Signing” also requires the method of signing to identify the signatory and indicate their intention in executing the document. This may be done with supporting evidence and the method utilised is as “reliable as appropriate … for the purpose for which the information was recorded”. Considering this, directors of companies must still be prepared to adequately verify both their identity and their appointment as a director, in order to validly execute documents electronically.
Contact us for more information regarding how this amendment may affect your residential or commercial land sale, your commercial business sale, or your commercial lease.