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The federal Treasurer has introduced to Parliament a bill to make permanent the reforms allowing companies to use technology to sign documents.
Following on from industry consultation on the draft legislation, the federal government has introduced a new bill to Parliament that seeks to amend the Corporations Act 2001 so that technology can be used for meetings and the execution of documents.
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While temporary measures came into effect last year to allow companies to satisfy certain legal obligations of the Corporations Act 2001 via electronic means (which led to many state governments and companies enabling digital signatures), these reforms were due to expire at the end of March next year.
However, on Wednesday (20 October), the Treasury introduced a new bill, the Corporations Amendment (Meetings and Documents) Bill 2021, to make these changes permanent.
The permanent reforms seek to:
- Ensure that meetings can be held physically, as a hybrid or, if expressly permitted by the entity’s constitution, virtually, provided that members, as a whole, are given reasonable opportunity to participate in the meeting
- Ensure that companies and registered schemes can meet their obligations to send documents in hard copy or soft copy and give members the flexibility to receive documents in their preferred format
- Allow documents, including deeds, to be validly executed in technology-neutral and flexible manners, including by company agents
If passed, the reforms will be reviewed two years after the legislation commences, to ensure that they are operating as intended.
According to Nadia Rawlings, director of Bennett & Philp Lawyers, the new bill could enable lenders to permanently accept digital signatures on mortgages - and could particularly benefit commercial mortgages.
Speaking to The Adviser, Ms Rawlings said: “Lenders have been looking for ways to facilitate easier execution of mortgage documents for some time and the pandemic has made it difficult for corporate borrowers to comply with the old requirements of wet ink signature by two directors in the same room at the same time.
“These changes finally give lenders some certainty in allowing their borrowers to sign remotely and by electronic signature will retain the benefit of the important protections provided by section 127 of the Corporations Act 2001.”
Similarly, Dan Bognar, general manager and vice president of DocuSign APJ, said: ”DocuSign has been actively engaged with the Australian Government for the last two years to influence this critically important bill. This much anticipated bill will bring further clarity and confidence in the use of electronic agreements and signatures.
"This is a big win for commercial lending specifically, as it allows companies to continue to sign deeds and mortgages under the Corporations Act on a permanent basis."
Mr Bognar noted that CBA had seen a 17 day faster turnaround using DocuSign eSignature compared to wet signatures, adding that this had significantly improved their time to fund and improving the customer experience.
"Making the temporary provisions permanent will allow them to continue to provide this experience to companies that need to sign under the Corporations Act," he said.
However, Ms Rawlings noted that the federal government was unsuccessful in its last attempt to make split execution and electronic signing permanent, so she said she hoped that this time the bill would be passed.
“The bill is still awaiting parliamentary debate so we will need to see what happens,” she said.
“In the meantime, split execution and electronic signing is permitted under the auspices of the current temporary Covid-19 legislation, which is set to expire on 31 March 2022.
“It is important to note that, whilst this legislation permits companies to sign electronically under section 127 of the Corporations Act, mortgage law remains the subject of state and territory legislation, and not all mortgage documents can be signed electronically.”
The bill was referred to the Senate economics legislation committee, with a report on the bill due by 18 November.
In introducing the bill on behalf of Josh Frydenberg on Wednesday (20 October), the Assistant Treasurer and Minister for Housing and Minister for Homelessness, Social and Community Housing, Michael Sukkar, commented that the permanent reforms were “necessary so that companies know their obligations and can get on with business”.
“The reforms allow documents to be signed and executed in flexible and technology-neutral ways to ensure that, regardless of whether company officers execute documents electronically or physically, the execution will be valid,” he said.
“The reforms extend the ability of company agents to make contracts and execute documents – including deeds – flexibly.”
Treasurer Frydenberg has estimated that the reforms would provide relief to around 1 million operating businesses and deliver deregulatory savings of $450 million each year, averaged over 10 years.
“Importantly, the bill ensures that companies can continue to meet their obligations amid the uncertainty of the COVID‑19 pandemic,” he said.
“The Morrison Government will continue ensuring Australia’s regulatory settings are fit‑for‑purpose as we emerge from the pandemic, rebuild our economy and secure Australia’s future.”
[Related: Non-major bank launches digital signatures]
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