Permanent Amendments Made to Australia’s Corporations Act: Electronic Signatures, Sharing Electronic Documents and Virtual Meetings
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One Asia Lawyers Compliance Newsletter April 2022
Permanent Amendments Made to Australia’s Corporations Act:
Electronic Signatures, Sharing Electronic Documents and Virtual Meetings
The Corporations Amendment (Meetings and Documents) Act 2022 (Cth) (“Amendment Act”) received royal assent on 22nd February 2022, making permanent amendments to Australia’s Corporations Act 2001 (Cth) (“Corporations Act”). The amendments establish a permanent mechanism to allow companies and registered schemes to hold hybrid (in person and remote) meetings, and to use technology to execute, sign and share company and meeting related documents. These amendments are based on the temporary measures enacted under the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth), which expired on 31st March 2022. Please see our September newsletter for more information on the previous temporary measures (available in Japanese).[1]
Execution and Signing of Documents
Schedule 1 of the Amendment Act has taken effect from 23rd February 2022, introducing new provisions which enable electronic execution and signing of company and meeting related documents (including deeds[2]).
The new section 110A(1) of Schedule 1 enables documents to be signed in either physical or electronic form. The method of signing must: (a) identify the signatory and indicate their intention in respect of the information recorded in the document, and (b) be as reliable as appropriate for the purpose for which the information was recorded, in light of all the circumstances, or be proven in fact to have fulfilled the functions described in paragraph (a) by itself or together with further evidence.[3] These new signing methods apply to documents (including deeds) to be signed under section 126 (i.e. by an agent on behalf of the company) or under section 127 (i.e. by the director(s) and/or company secretary, as appropriate), and also to documents (including deeds) which relate to certain meetings or resolutions.[4]
The new section 110A(4) of Schedule 1 permanently permits companies to execute documents by split execution (i.e. multiple parties can execute separate copies of a document). Additionally, the parties need not sign each copy of the document using the same method of signing (i.e. one party may sign by hand whilst another signs electronically).[5]
Schedule 1 of the Amendment Act also amends section 126 of the Corporations Act, enabling agents to make, vary, ratify or discharge contracts, or execute documents (including deeds) on behalf of the company without being appointed by deed. In addition to this, an agent may execute a document as a deed without any requirements for witnessing or delivery, and the document may be signed in either physical or electronic form. While common law rules require agents to be appointed by deed, execution of documents to be witnessed and deeds to be delivered, the Amendment Act has now relinquished these rules.
Schedule 1 of the Amendment Act implements similar amendments for section 127 of the Corporations Act. It also removes the common law requirements for witnessing the execution of documents and delivery of deeds, and allows for documents to be signed in either physical or electronic form. In addition to this, section 127 has been expanded to permit proprietary companies with a sole director and no company secretary to execute a document (in addition to proprietary companies with a sole director who is also the sole company secretary).[6]
Sending Meeting Documents
Schedule 2 of the Amendment Act has taken effect from 1st April 2022, now permitting meeting related documents to be sent in electronic form. This provision applies to documents covered by section 110C(2) that are required or permitted to be sent to a person by a company, the responsible entity of a registered scheme or a disclosing entity.[7] The documents covered by section 110C(2) are those which relate to meetings of members of a company or registered scheme, documents which relate to resolutions to be considered by members of a company, annual financial reports and notices of members’ rights.
Under the new section 110D, these documents (noted above) may be sent in physical or electronic form, or sufficient information may be sent to the recipient in either physical or electronic form to allow the recipient to access the document electronically. These documents may only be sent or made available in electronic form if, at the time they are sent, it is reasonable to expect that the document(s) would be readily accessible so as to be useable for subsequent reference.[8]
Notwithstanding this provision, members of companies and registered schemes may elect to receive documents in physical or electronic form (or elect not to receive any annual financial reports or documents prescribed by regulations for the purpose of section 110E(5)).[9] Additionally, members can make ad hoc requests to receive a particular document in physical or electronic form provided that they make such request within a reasonable time before the deadline by which the document must be sent, or alternatively after the document has been sent.[10]
Section 110K imposes new obligations on public companies, responsible entities of registered schemes and disclosing entities to notify members, at least once each financial year, of their rights to elect[11] and make ad hoc requests[12] for documents to be sent in physical or electronic form, and of their rights to elect not to be sent annual financial reports and/or documents prescribed by regulations (for the purpose of section 110E(5)). Alternatively, these entities may make such notice readily available on a website.
Virtual Meetings and Meeting Polls
Schedule 2 of the Amendment Act (which has taken effect from 1st April 2022 as noted above) has also introduced new provisions which permanently permit hybrid members’ meetings, virtual-only members’ meetings (provided that they are expressly required or permitted under the company’s constitution) and virtual directors’ meetings. In addition to this, new requirements and members’ capabilities have been introduced in respect of polls at meetings.
Hybrid meetings refer to meetings held both physically and virtually, while virtual-only meetings refer to meetings held entirely virtually. The new sections 249R and 252P of Schedule 2 permit hybrid members’ meetings for companies and registered schemes, respectively. Virtual-only members’ meetings are also permitted by these sections, on the condition that they are expressly required or permitted by the constitution of the company or registered scheme. In addition, in the case of a registered scheme, the provisions of the constitution that require or permit virtual-only meetings must have been included in the scheme’s constitution (a) at the time the scheme was established, or (b) by special resolution of the members of the scheme. Regardless of whether a member attends the meeting physically or virtually, they are taken for all purposes to be present in person at the meeting.[13]
Under section 249S of Schedule 2, any company or registered scheme that holds a members’ meeting must give the members entitled to attend the meeting, as a whole, a reasonable opportunity to participate in the meeting. This includes obligations to hold meetings at reasonable times, at reasonable locations (for physical or hybrid meetings) and to use reasonable virtual meeting technologies that allow members to exercise their rights to ask questions and make comments both orally and in writing (for hybrid and virtual-only meetings).
As for directors’ meetings, they may now be called or held using any technology consented to by all directors, as stipulated by the new section 248D of Schedule 2. The consent may be a standing one, and a director may only withdraw their consent within a reasonable period before the meeting.
The Amendment Act imposes new requirements for listed companies and listed registered schemes regarding polls at meetings. Under the new sections 250JA and 253J, a resolution put to the vote at a meeting of members (of a listed company or listed registered scheme) must be decided on a poll (and not a show of hands) if a vote on the resolution is set out in a notice of a meeting or a poll is demanded.
Members of companies and registered schemes are now able to request for observation and scrutiny of the conduct and outcome of polls. Under the new sections 253UB and 253UD, members of a company or registered scheme who hold at least 5% of voting power may request the company or responsible entity of the scheme to appoint an independent person to observe and prepare a report on the conduct of the poll. Additionally, under the new sections 253UC and 253UE, these members (holding at least 5% of voting power) may request that an independent person be appointed to scrutinise and prepare a report on the outcome of the poll.
[1] Available at https://oneasia.legal/7446
[2] A deed is a special type of binding promise or commitment.
[3] Section 110A(2) of the Corporations Amendment (Meetings and Documents) Act 2022.
[4] The applicable meetings and resolutions are as follows: (a) a meeting of the members of a company or registered scheme (including a meeting of a class of members), or (b) a resolution to be considered by the directors or members of a company (including a resolution to be considered by a class of members of a company) without a meeting, or (c) a meeting of the directors of a company (including a meeting of a committee of directors). Section 110(2) of the Corporations Amendment (Meetings and Documents) Act 2022.
[5] Section 110A(4) of the Corporations Amendment (Meetings and Documents) Act 2022.
[6] Amendments made to sections 127(1)(c) and 127(2)(c). Previously, for a proprietary company with a sole director, the director must also have been the sole company secretary to execute documents.
[7] Section 110C(1) of the Corporations Amendment (Meetings and Documents) Act 2022.
[8] Section 110D(2) of the Corporations Amendment (Meetings and Documents) Act 2022.
[9] Section 110E of the Corporations Amendment (Meetings and Documents) Act 2022.
[10] Section 110J of the Corporations Amendment (Meetings and Documents) Act 2022.
[11] Members’ rights to elect under section 1110E of the Corporations Amendment (Meetings and Documents) Act 2022.
[12] Members’ rights to request under section 110J of the Corporations Amendment (Meetings and Documents) Act 2022.
[13] Section 249RA(3) of the Corporations Amendment (Meetings and Documents) Act 2022.
