Move to permanent reforms to the Corporations Act – electronic signatures, virtual meetings

The Federal Government has released the exposure draft of legislation (Exposure Draft) amending the Corporations Act 2001 (Cth) (Corporations Act) to allow for technologically-assisted meetings and the long-awaited electronic execution of company documents.

As noted in our previous article, the emergency reforms under Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 expired on 21 March 2021, which resulted in uncertainty around the use of electronic signatures to execute company documents.

Electronic Signing of Documents

The proposed amendments in the Exposure Draft would allow companies to use electronic signatures to execute documents under section 127 of the Corporations Act.

The Exposure Draft would also permit witnessing of documents using technology, including teleconferencing.

In particular, under the Exposure Draft, the director, secretary or witness would be permitted to execute a document electronically if:

1. 1. the director, secretary or witness was able to view the entire contents of the document;
   2. the director, secretary or witness was able to verify the identity of the person and their intention to sign the document; and
   3. the method used was as reliable as appropriate for the purposes for which the document was generated.

These requirements appear to be consistent with the requirements for electronic signatures under the Electronic Transactions Act 1999 (Cth).

Virtual Meetings

The proposed amendments in the Exposure Draft relating to virtual meetings would:

1. 1. allow meetings at one or more physical venues, wholly virtual meetings (if allowed for in a company’s constitution), and part virtual and part physical meetings;
   2. depending on how a meeting is held, deem the meeting as having taken place at a certain venue, provided that the meeting time is held ‘at a reasonable time’ at that venue and it must be reasonable to hold the meeting at that venue;
   3. allow any document that relates to a meeting to be given electronically and to be signed electronically;
   4. set default voting to a show of hands unless a poll is demanded by members with at least 5% of the votes; and
   5. provide clarity that a court may only set aside a meeting where members as a whole did not have a reasonable opportunity to participate in the meeting and a substantial injustice has been caused (or may be caused) that cannot be remedied by any other order of the court.

Observations

We note that the proposed amendments in the Exposure Draft would, if passed, have the benefit of being technologically neutral, which would allow the legislation to be interpreted in line with any emerging or new technologies.

The Exposure Draft also recognises the level of participation reasonable for a listed company’s AGM will be different than a small family-owned company, and addresses concerns raised in our previous article regarding potential allegations by shareholders that a meeting had been held unlawfully.

Consultations on the Exposure Draft are currently being held and will close on 16 July 2021. Please contact us if you have any queries or concerns regarding the Exposure Draft.

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Authored by:

Antoine Pace, Partner
Raisa Blanco, Senior Associate
Eric Chen, Lawyer