The Commonwealth Government is taking steps to make the Corporations Act 2001 (Cth) (Corporations Act) more technology neutral, initially, in respect of meetings and execution. Such steps have been propelled by the difficulty of convening in-person meetings of members of companies and signing and witnessing documents face-to-face amid the public health restrictions put in place in response to (COVID-19).
Temporary amendments made by Schedule 1 to the Treasury Laws Amendment (2021 Measures No 1) Act 2021 (TLA 1 Act) currently permit the use of technology for meetings, including wholly virtual meetings and electronic execution of documents, including deeds.
The government has also proposed permanent reforms, set out in exposure draft Treasury Laws Amendment (Measures for Consultation) Bill 2021: Use of technology for meetings and related amendments (TFM Aug 2021 Bill) finishing on 10 September 2021.
The story so far
The road to these long-awaited reforms has been a little rocky over the course of 2020-2021. After the expiry on 21 March 2021 of the COVID-19-related emergency directions originally made by the Treasurer in May of the previous year, the law relating to the execution of documents by company officers and the rules regarding company meetings technically reverted to the state it was in before the commencement of those directions, although ASIC maintained a no-action position on certain meetings-related requirements.
While Parliament had been attempting to pass legislation that would have extended the operation of the temporary measures, political opposition to reforms to the continuous disclosure regime that were packaged along with those measures froze the Bill before Senate went into recess.
It wasn’t until 13 August that a revised version of the TLA 1 Act entered into force, implementing a temporary legislative regime allowing electronic execution and hybrid or virtual meetings between 14 August 2021 and 31 March 2021, while Treasury consults on more permanent reforms.
Execution of documents under the TLA 1 Act
Schedule 1 to the TLA 1 Act significantly amends section 127 of the Corporations Act to formally permit the electronic execution of documents, subject to certain requirements. Some key features of these reforms include:
- Company officers can now electronically sign electronic copies or counterparts of documents – importantly, including deeds. This had previously been in doubt, since deeds are traditionally paper documents and there had been some uncertainty about whether this rule had been modified by statute. Now, documents, including deeds, can be executed where:
- An appropriately reliable method is used to identify the signatory and to indicate their intention to sign. This is meant to be technologically neutral in its approach, so that any form of technology can be used so long as it is fit for purpose, ranging from typing or pasting facsimile signatures to more sophisticated platforms for identity verification, signature and exchange.
- The copy or counterpart includes the entire contents of the document.
- Instead of both company officers having to sign the same, static document, company officers can now sign separate counterparts (so-called “split execution”), provided that each copy or counterpart includes the entire contents of the document. Each counterpart does not also have to include the signature of any other person signing the document, such as another director. Case law had previously disapproved of this method of execution, despite its conveniences.
- Company officers can now witness the fixing of a company seal by electronic means, subject to a prescribed procedure.
Virtual and hybrid meetings under the TLA 1 Act
In respect of the conduct of meetings of company members, Schedule 1 to the TLA 1 Act also creates:
- A new Part 2G.5, which contains temporary provisions allowing companies to:
- hold a wholly virtual or hybrid (part-virtual, part-in-person) meeting pursuant to a range of specified procedures governing the convening of the meeting, accessibility, conditions for quorum and voting;
- communicate documents and store records of meetings, including minutes of meetings, electronically.
These measures will sunset on 31 March 2022.
- A new Part 2G.6, which provides ASIC with a range of permanent emergency powers for use in exceptional circumstances to:
- extend the time frame for companies to hold an annual general meeting (AGM) on a class basis;
- allow a company or registered scheme, or a class of companies or registered schemes, to hold a wholly virtual meeting;
- allow entities or a class of entities to give documents electronically (or provide sufficient information to the recipient to allow them to access the document electronically); and
- extend the time frame for an entity or a class of entities to give a document.
These measures are not subject to the same sunsetting provisions as the Part 2G.5 reforms.
For more information on the TLA 1 Act reforms, see Legal update, Parliament amends Corporations Act to facilitate virtual meetings and electronic execution of documents and to introduce state of mind test into continuous disclosure liability regime.
Proposed permanent reforms
On 30 August 2021, the government released the exposure draft TFM Aug 2021 Bill for consultation. The consultation finished on 16 September 2021. The TFM Aug 2021 Bill proposes to make permanent the temporary reforms under the TLA 1 Act in relation to document execution and communication and meetings.
How will the reforms affect document execution?
Schedule 1 to the TFM Aug 2021 Bill introduces amendments to the Corporations Act to allow certain documents to be signed in flexible and technology neutral manners and will apply, broadly, to:
- All documents required or permitted to be signed by, or on behalf of, a company under sections 126 and 127 of the Corporations Act, including deeds.
- Documents required or permitted to be signed under the Corporations Act that relate to certain meetings or resolutions.
For a detailed discussion on how the amendments will operate, see Legal update, New exposure draft legislation released: using technology to hold company meetings and to sign and send documents (August 2021): Revised provisions on electronic signing and witnessing.
How will the reforms affect the sending of meetings-related documents?
Schedule 1 to the TFM Aug 2021 Bill permanently amends the Corporations Act to allow a company or the responsible entity of a registered scheme to give meetings-related documents to a member electronically or in physical form by establishing a general regime that covers the electronic communication of documents.
For a detailed discussion on how the amendments will operate, see Legal update, New exposure draft legislation released: using technology to hold company meetings and to sign and send documents (August 2021): Revised provisions on electronic communication.
How will the reforms affect company meetings?
Schedule 1 to the TFM Aug 2021 Bill also permanently amends the Corporations Act to allow companies and registered schemes to hold physical and hybrid meetings. However, under the permanent changes, companies and registered schemes may only hold wholly virtual meetings provided that a wholly virtual meeting is expressly permitted or required by the entity’s constitution.
Unlike the temporary provisions under the TLA 1 Act, entities will not be able to rely on the Corporations Act to hold a wholly virtual meeting. For this reason, companies and schemes whose constitutions are silent on virtual meetings may wish to put a resolution to members at their 2021 annual general meeting to amend the constitution to expressly permit wholly virtual meetings. For more factors to consider when preparing for a company’s 2021 AGM, see Preparing for the 2021 AGM Season: 13 Steps to assist boards and advisers.
The amendments proposed by the TFM Aug 2021 Bill will also amend certain provisions of the Corporations Act relating to voting at meetings, in particular to:
- Require votes on resolutions that are set out in a notice of meeting for a meeting of a listed entity’s members to be conducted by way of a poll, regardless of the meeting format.
- Remove the default method for conducting votes at a meeting. The position will be that a resolution may be decided on a show of hands if a poll has not been demanded.
- Allow a member or group of members with at least 5% of the voting power to require a listed company or registered scheme to appoint an independent person to observe or report on a poll.
For a detailed discussion on how the amendments will operate, see Legal update, New exposure draft legislation released: using technology to hold company meetings and to sign and send documents (August 2021): Revised provisions on meetings of members of companies and registered schemes.
For detailed information about how companies can validly execute documents, including under the temporary provisions inserted by the TLA 1 Act, see Practice note, Execution of deeds and documents by companies incorporated under the Corporations Act 2001 (Cth).
Practical Law subscribers can access more information on document execution and company meetings in the following checklists and practice notes on the Practical Law Australia site:
- Practice note, General meetings.
- Practice note, Notices of general meeting.
- Practice note, Board meetings.
- Standard document, Notice of general meeting (in-person, hybrid or entirely virtual meeting).
- Checklist, Logistics of shareholder meetings held using technology.
- COVID-19: Execution of documents: key Australian legislation and legislative instruments.
- Quick guides to execution and witnessing of documents (ACT, NSW, Vic, NT, Tas, WA, Qld and SA).