Temporary measures were introduced under the Corporations (Coronavirus Economic Response) Determination (No 3) (Determination) to exempt certain persons from the operation of provisions interfering with their ability to manage their business through the impacts of COVID-19. Section 6(3) of the Determination did away with standard requirements for signing requirements. The measures expired as of 21 March 2021. In light of continued impact of the pandemic both Houses of Parliament have passed the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Bill) on 10 August 2021, which provides for electronic:
- document execution;
- notice of meetings;
- electronic keeping of minutes; and
- virtually held meetings.
Electronic execution
Section 127 of the Corporations Act 2001 (Cth) (Act) provides for ordinary requirements a company must fulfill when signing a document. The Bill permits a company, by inserting subsections (2A) and (3A) – (3C) under section 127 of the Act, to execute documents electronically by split execution and the electronic witnessing of the fixing of a company seal. In practice, this means that where a document is signed electronically under section 127 of the Act, other persons and parties can assume that it has been properly executed by the company.
Electronic execution of a document will be required to satisfy the following criteria pursuant to the soon amended section 127 of the Act:
- the copy must include the entire contents of the document, circulating and signing the execution page is not permitted;
- identification of the person and indication of their intention to sign the document must occur; and
- the method must be as reliable as appropriate in the circumstances.
Virtual meetings
The Bill sees the insertion of section 249J(4) into the Act which provides that a notice of meeting is taken to be given, among other scenarios, “if it is sent by means of an electronic communication in accordance with subsection 253RA(1) – on the business day after it is sent.”[1] Clearly, is in response to the difficulties with providing notice of meetings in the ordinary manner in the circumstances of the pandemic by facilitating a pragmatic solution.
The Bill will also see the insertion of Part 2G.5 within the Act, which enables virtual Chapter 2G meetings during this difficult time, provided they are facilitated by technology providing a reasonable opportunity for members to participate.[2] Similarly, a participant must be able to vote at a virtual meeting and also be given access to any documents considered during the meeting.[3] A Chapter 2G ‘meeting’ is simply a meeting of a company’s members and/or its directors.[4] Companies must facilitate participation in virtual meetings or risk the proceeding being found invalid by Court. If the Court is of the opinion and declares that:
- a substantial injustice has been caused or may be caused;[5] and
- the injustice cannot be remedied by any order of the Court,[6]
the meeting or proceeding will be invalid.[7]
Electronic recording and keeping of minute books is facilitated by sections 253S of the Act, to be inserted by section 31 of the Bill. This section provides:
“[i]f information is required to be recorded in a minute book, the information may be recorded in electronic form if, at the time of the recording of the information, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference.”
Where minute books are required to be kept at a certain place, this requirement will be satisfied if:
- an electronic form is open for inspection at the place in accordance with the Act;[8] and
- having regard to all the relevant circumstances at the time of the generation of the electronic form of the minute book, the method of generating the electronic form of the minute book provided a reliable means of assuring the maintenance of the integrity of the information contained in it;[9] and
- at the time of the generation of the electronic form of the minute book, it was reasonable to expect that the information contained in it would be readily accessible so as to be useable for subsequent reference.[10]
Disclosure obligations
Various changes to the law surrounding continuous disclosure obligations have been made by the Bill. This article will primarily consider the changes made in response to the evolving pandemic.
What does this mean for your business?
The Federal Government has responded to the growing Coronavirus pandemic and the issues it presents to fulfilling the essential mechanics of a company’s business operations by passing a Bill providing pragmatic and practical processes to alleviate these issues. Company members and employees will need to be aware, broadly, that various company functions, like signing documents and holding meetings, can lawfully be performed electronically or virtually where they otherwise were not able to do so.
Links and further references
Legislation
Australian Securities and investments Commission Act 2001 (Cth)
Treasury Laws Amendment (2021 Measures No. 1) Bill 2021
Further information about e-signing and continuous disclosure
If you need advice on electronically facilitating your company’s affairs and complying with ongoing disclosure obligations, contact us for a confidential and obligation-free discussion:
Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au
Disclaimer
This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.
[1] Corporations Act 2001 (Cth) s 249J(4)(b) as will be modified by the Bill s 13.
[2] Corporations Act 2001 (Cth) s 253Q(1) as will be modified by the Bill s 31.
[3] Corporations Act 2001 (Cth) ss 253Q(4),(5) and 253RA as will be modified by the Bill s 31.
[4] Corporations Act 2001 (Cth) s 253P as will be modified by the Bill s 31.
[5] Corporations Act 2001 (Cth) s 1322(3A)(c)(i) as will be modified by the Bill s 33.
[6] Corporations Act 2001 (Cth) s 1322(3A)(c)(ii) as will be modified by the Bill s 33.
[7] Corporations Act 2001 (Cth) s 1322(3A)(c) and (d) as will be modified by the Bill s 33.
[8] Corporations Act 2001 (Cth) s 253P(2)(a) as will be modified by the Bill s 31.
[9] Corporations Act 2001 (Cth) s 253P(2)(b) as will be modified by the Bill s 31.
[10] Corporations Act 2001 (Cth) s 253P(2)(c) as will be modified by the Bill s 31.
Related insights about e-signing and continuous disclosure
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COVID imposed document e-signing to remain
The Treasury Laws Amendment Bill 2021 gives companies the power to conduct business virtually, with the ability to execute documents electronically, hold virtual meetings, and maintain electronic minute books. A practical solution to pandemic-related challenges.
