On 21 March 2021, the Corporations (Coronavirus Economic Response) Determination (No.3) 2020 (Cth) that permitted the electronic execution of documents under section 127 of the Corporations Act 2001 (Cth) and allowed for meetings to be held virtually, expired.
While the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 had sought to make the temporary rules under the Determination permanent, the Bill did not pass the Senate before its expiry date of 21 March 2021. Accordingly, the Determination was repealed on 22 March 2021.
What you need to know
In short, the expiry of the Determination means that:
- the pre-COVID position on electronic signing and split execution under s 127 of the Corporations Act applies (see further below); and
- companies that are required to hold meetings can only hold virtual meetings if the company constitution provides for this.
Background
On 25 March 2020, emergency legislation (the Coronavirus Economic Response Package Omnibus Act 2020 (Cth)) came into effect which gave the Treasurer power to make determinations modifying the operations of the Corporations Act.
On 5 May 2020, the Treasurer used this power to make the Determination which modified the operation of the Corporations Act to permit virtual company meetings, electronic signing of agreements and “split execution”. “Split execution” occurs when the officers of a company sign separate counterparts (duplicates) of a document, rather than signing the same document.
The Determination was later extended by Corporations (Coronavirus Economic Response) Determination (No.3) 2020 (Cth) until 21 March 2021. The Determination has now expired.
Section 127 of the Corporations Act
Section 127 provides that a company may execute a document if it is signed by either:
- two directors;
- a director and a company secretary; or
- one director only (if the company has a sole director who is also the sole company secretary).
The temporary changes under the Determination allowed for the use of an electronic signature to meet requirements for a signature under this section and extended the s 127 definition of ‘document’ to include a document in electronic form. These changes clarified some uncertainty about whether electronic or split execution is permitted under s 127. Since the expiry of the Determination, s 127 must be read without the benefit of these temporary changes.
What you need to do
It is important to ensure that:
- all documents are validly executed pursuant to the requirements of s 127 of the Corporations Act which were in place prior to the Determination;
- any documents that have been executed relying on the Determination on or since 21 March 2021 are re-executed to comply with the s 127 requirements; and
- company meetings required under the Corporations Act are held in person, unless the company’s constitution permits holding meetings virtually.
More information
If you have any queries or would like further information about this article, please contact:
Justin Hill
Principal
M: 0418 578 701
E: jhill@pageseager.com.au
Ella Wade
Lawyer
T: (03) 6235 5161
E: ewade@pageseager.com.au
Published: 24 March 2021
