Senate Select Committee on Fintech and Regulatory Tech publishes interim report

The need for permanent corporate law reforms for virtual company meetings and electronic communications and signatures by companies – Senate Select Committee inquiry on Financial Technology and Regulatory Technology interim report and recommendations.

In September 2020, the Senate Select Committee inquiry on Financial Technology and Regulatory Technology (Committee) released its interim report. The preliminary recommendations indicates a path to permanent reforms reflecting the temporary reforms that had been passed in response to the COVID-19 pandemic.

The Committee’s preliminary recommendations include:

• amendments to the Corporations Act 2001 (Cth) to allow companies to decide the best format for holding annual general meetings and other prescribed meetings, including through virtual meetings, in-person meetings or a hybrid;
• amendments to the Corporations Act to allow companies to communicate with shareholders electronically by default, with shareholders having the right to request paper-based communications on an opt-in basis;
• amendments to the Corporations Act and other relevant legislation to allow for the execution of legal documents using electronic signatures; and
• amendments to the relevant legislation to enable the witnessing of official documents via videoconferencing or other secure technological means.

Virtual meetings

The Committee supported industry submissions regarding permanent reforms to the Corporations Act to permit the use of virtual meetings and hybrid meetings, noting that technology has enabled businesses to continue operating during the COVID-19 crisis period, and commending the Treasurer’s decision to extend the Corporations (Coronavirus Economic Response) Determination (No 1) 2020 to 21 March 2021.

The Committee also agreed with submissions calling for broader changes to make the Corporations Act technology-neutral and future-proof in order to enable efficiencies in company operations and to enable companies to adopt technology changes as required.

Electronic signatures and witnessing

The Committee supported permanent reforms to permit electronic execution and witnessing of legal documents, acknowledging that the interaction between Federal, State and Territory law is a complicating factor. This has been particularly evident during the COVID-19 crisis period, where some States and Territories had passed temporary reforms to introduce electronic execution and witnessing protocols, while others had not.

The Committee also acknowledged that permanent reforms could be introduced while maintaining a similar level of security as ‘wet ink’ signatures, with industry submissions noting that electronic signatures could potentially be less liable to fraud than traditional signatures where digital records can be created to evidence the electronic execution and witnessing.

Next steps

This report sets out the Committee’s preliminary recommendations, and the final report, due by April 2021 is intended to deal with longer term structural issues. However, it is encouraging to see that the Committee has largely agreed with industry’s views in relation to virtual meetings and electronic signatures. While the temporary reforms at a Federal level have been extended to 2021, the Committee has suggested that the Government should use this time to prepare permanent reforms for implementation.

Authored by:

Antoine Pace, Partner
Raisa Blanco, Associate