Execution of documents – where do things stand?
The law regarding execution of documents in Australia has been in a constant state of flux over the past two years, with numerous temporary measures coming and going, and coming back. While reforms permitting electronic execution have generally been welcomed, the continuing uncertainty on what rules apply at what time has caused confusion and disruption. Thankfully, some permanent reforms are now around the corner, with hopefully more to come.
- A snapshot of what can and cannot be executed electronically, as at the date of publication, is below:
|Company||Yes – all jurisdictions||Yes – all jurisdictions|
|Individual||Yes – all jurisdictions||Yes (no witness required) – Queensland & Victoria|
Yes (but AV witness required) – New South Wales
No – South Australia, Western Australia, Tasmania, Northern Territory and Australian Capital Territory
- Execution by a sole director (where there is no company secretary) can be assumed to bind the company;
- Caution should still be used in accepting and relying on documents executed electronically, as specific requirements need to be met; and
- Registries (including land registries) may have specific requirements for wet ink (or in order to accept electronic execution) and these should be considered on a case by case basis at the time, or wet ink execution insisted upon.
Electronic execution by companies
The Corporations Amendment (Meetings and Documents) Bill 2021 (Cth) (Bill) was passed on 10 February 2022, permanently amending the Corporations Act 2001 (Cth) (Corporations Act) to allow companies to execute documents electronically.
The execution provisions are generally on the same terms as the temporary measures that were introduced in 2020 and 2021 (see our article here), including allowing ‘split execution’ (i.e. where each officeholder signs a separate complete counterpart of the document).
In order to rely on a company’s electronic execution, lenders will still need to be satisfied that:
- a method is used to identify the person and indicate their intention to sign (typically easy to satisfy);
- the copy or counterpart includes the entire contents of the document (i.e. it cannot simply be the signing page that is signed); and
- the method used was as reliable as appropriate for the purposes, or proven to be.
Thankfully, the Bill also explicitly applies to execution of deeds, addressing uncertainties that existed under the temporary measures.
While the Bill has passed both houses, it is still awaiting assent before becoming law. Until then, the temporary measures currently in place will continue to apply until 31 March 2022.
Sole director signing
The Bill also brings welcome relief in extending the assumptions under section 129 of the Corporations Act as to due execution where a document is signed by a sole director where there is no company secretary.
Previously, a quirk of the drafting and evolution of law meant that, where a company secretary had not been appointed, execution by a sole director who was not also the company secretary (and where there was none) would fall outside of the section 129 assumptions of due execution, leaving parties to either accept the execution without reliance on the typical assumptions, or undertake further steps (such as the appointment as secretary, or obtaining shareholder resolutions).
The passing of the Bill should help to simplify sign-off processes, and avoid the uncertainty and cumbersome workarounds that were previously required.
Importantly, if a company has a sole director and a different company secretary, both will still need to sign to get the benefit of the assumptions under section 129 of the Corporations Act.
Electronic execution by individuals
While electronic execution of agreements by individuals has long been accepted (facilitated by the various Electronic Transactions Acts in each jurisdiction), execution of deeds remains inconsistent across each jurisdiction.
A brief summary of the current position in each State and Territory is summarised below. Given the continuing changes, care should be taken to ensure electronic execution is acceptable at the relevant time.
Queensland and Victoria
Queensland and Victoria have among the simplest requirements, permanently permitting deeds to be executed electronically without a witness. Both jurisdictions also have additional provisions facilitating witnessing via electronic means (e.g. audiovisual link), however these are not mandatory for the valid execution of deeds.
New South Wales
Deeds can be executed electronically, but will still require a witness. Witnessing can occur via electronic means (e.g. audiovisual link), provided that the witness endorses the document (or copy) with a statement specifying the method used to witness and that the document was witnessed in accordance with section 14G Electronic Transactions Act 2000 (NSW).
Australian Capital Territory
Temporary measures are in place to allow execution of certain limited ‘relevant documents’ (generally wills and powers of attorney) electronically, with witnessing via audiovisual link and subject to certain requirements. Given the temporary and limited scope, these should be considered on a case by case basis each time.
South Australia, Western Australia, Tasmania and Northern Territory do not have measures which facilitate execution of deeds electronically (either due to the requirement of a physical witness, or a ‘wet ink’ signature).
Land registry documents
Parties should be very cautious of executing documents electronically where these are required to be registered at land registries, particularly where these are lodged ‘over the counter’, as land registries may have their own specific or additional requirements. For example, we have seen land registries refuse to register:
- powers of attorney executed electronically, on the basis the registry is unable to say whether the method used was ‘as reliable as appropriate’ (in the absence of a direction by the Australian Securities and Investments Commission (ASIC) or a Court); and
- a transfer executed electronically, on the basis that the signature (which appeared as cursive text) did not look enough like a signature.
The use of an electronic lodgment network operator (e.g. PEXA, Sympli) may provide an option in some circumstances where wet ink execution is not feasible, however this should be considered on a case by case basis.
As always, mortgagees still need to ensure that they comply with verification of identity obligations.
Some key reminders
Despite the introduction of permanent reforms, care should still be taken when executing documents electronically, or accepting documents executed electronically by others. Some of the key considerations include:
- wherever possible, requiring the use of a platform with inbuilt verification (there are many on the market today), rather than the insertion of a scanned signature or image, to minimise the risk of fraud and to ensure that the execution method is ‘as reliable as appropriate’;
- obtaining personal authentication. For example, where a guarantee is purported to be signed electronically by a director, it would be prudent to follow up with a phone call directly with that director, to confirm they signed and retain a record of that conversation; and
- parties should engage early to understand each others’ requirements and expectations for execution, and issues addressed early on to avoid transactions being delayed at the last minute. This discussion should extend beyond the transaction documents themselves and include other documents that one party may rely upon (such as leases or contracts).
If you have any questions in relation to execution of documents, please reach out to one of the team.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.