On 10 August 2021, the Government passed the Treasury Laws Amendment (2021 Measures No.1) Bill (Bill). The legislation extends previously passed temporary relief measures including:
- allowing for the use of electronic means to distribute and execute documents until 31 March 2022;
- allowing for wholly virtual meetings until 31 March 2022; and
- granting ASIC permanent powers to grant individual or classes of companies and registered schemes the same relief beyond 31 March 2022.
Section 127 of the Corporations Act 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 allow for the use of an electronic signature to meet requirements for a signature under this section and extend the section 127 definition of ‘document’ to include a document in electronic form.
The Bill permits the execution of documents by a company under section 127 by electronic means and by way of “split execution”. Therefore, where a document is signed electronically under section 127, third parties can assume that it has been properly executed by the company provided the following criteria are met:
- the copy must include the entire contents of the document. This means it is not possible to circulate and sign only the execution page only – which we have seen occur in some transactions;
- a method must be used to identify the person and indicate their intention to sign the document; and
- the method must be as reliable as appropriate for the purposes for which the document was generated, or proven in fact to have indicated the person’s identity and intention.
Virtual meetings of shareholders
The Bill allows meetings (including AGMs) to be held using technology (as virtual or hybrid meetings), provided that ‘the members as a whole’ have a reasonable opportunity to participate.
If electronic means are used to hold the meeting, the notice of the meeting must include sufficient information to allow all attendees to participate. All persons participating virtually are counted in determining the quorum.
Importantly, the new virtual meeting provisions mandate that members must be allowed to exercise their rights to ask questions at a virtual meeting orally as well as in writing. As such, it will be necessary to ensure that the virtual meeting platform used has a two-way audio facility to ensure both oral and written questions can be asked during the meeting.
In addition, the changes permit notices of meeting to be given electronically. For example, either by attaching the notice to an email or by sending an electronic communication that contains a web link providing access to the notice.
What you need to do
In light of these changes, it is important that your company:
- establishes a process for signing and accepting the execution of documents electronically;
- if contemplating a virtual or hybrid meeting, ensures the meeting is held in accordance with the recent changes; and
- considers amending its constitution to allow for flexibility to hold wholly virtual or hybrid meetings if it does not already do so, as the changes are currently only in effect until 2022.
If you have any queries, or would like further information regarding this article, please contact:
M: 0418 578 701
T: (03) 6235 5147
Published: 25 August 2021