Electronic document execution measures hit roadblock

In mid-February 2021, Treasurer Josh Frydenberg announced an extension to the temporary relief measure relating to virtual AGMs and the signing and sending of electronic documents.

It was expected that the current temporary rules would be extended; however, the bill which proposed to do so (the Treasury Laws Amendment [2021 Measures No. 1] Bill 2021) did not pass on the last Parliament sitting day prior to 21 March 2021. The Senate has adjourned debate on the bill until 3 August 2021.

Smarter SMSF CEO Aaron Dunn said the determination authorised by statute currently provided relief until 21 March 2021, with the extension intended to grant relief through to 15 September 2021, providing the government with the necessary time to make these changes permanent.

“To effect this extension of time, Treasury Laws Amendment (2021 Measures No. 1) Bill was introduced into Parliament,” Mr Dunn said.

“However, due to some proposed amendments within the Senate, this bill remains unfinalised. As a result, the current temporary measures to section 127 of the Corporations Act have now lapsed.”

Mr Dunn said according to the sitting calendar, the Senate will not sit to finalise this bill until the week commencing 10 May 2021.

“While these temporary measures have hit a roadblock, it’s not all bad news,” he said.

“There was an amendment late last year to the definition of ‘document’ in the Corporations Act 2001 that extends to include a document in electronic form, arguably making it easier for the use of electronic signing (Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth)).”

At a state level, Mr Dunn said there has also seen some positive outcomes in this area of electronic execution and remote witnessing.

“In Victoria, the legislation Justice Legislation Amendment (System Enhancements and Other Matters) Bill 2021 has recently passed that permanently introduces provisions for deeds to be electronic, allows for split execution and allows for remote witnessing (subject to various requirements),” he said.

“Further, in Queensland, [a] proposed amendment has been introduced into Parliament to extend the current relief through to 30 September 2021 in regard to Justice Legislation (COVID-19 Emergency Response – Documents and Oaths) Regulation 2020 (Qld).”

While many states and territories have enacted interim legislative instruments as a response to COVID-19, with several of these allowing for electronic execution of documents, there are still cautions on the reliance on these measures.  

In a recent technical update, law firm Corrs Chambers Westgarth said that in the interim period between 21 March 2021 and when the bill is passed, it may be possible for companies to rely on these legislative instruments to execute certain documents electronically.

“However, be cautioned that these forms of execution are not afforded the protection of statutory assumption under the Corporations Act, and as such, you cannot electronically execute these documents under s127 of the Corporations Act,” partners Clare Corke , Rommel Harding-Farrenberg and Sandy Mak said.

“If you do so, your counterparties will not be able to rely on the assumptions under s129 of the Corporations Act. Further, these legislative measures are not uniform across the different jurisdictions and some only apply in respect of certain documents.

“We are hopeful that this position will be rectified soon, but in the interim, ensure that you exercise caution when executing documents or when accepting electronic execution by your contractual counterparts. 

“If you are seeking to execute under s127 of the Corporations Act, we recommend that you revert to wet ink signature of the same document by two directors (or a director and company secretary).”