The Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (“the Bill”) has been passed by the Senate on Monday of this week. The Bill temporarily amends section 127 of the Corporations Act 2001 (Cth) (“the Act”) to allow companies to once again execute documents, hold meetings, provide notices relating to meetings and keep minutes using electronic means or other alternative technologies.
The government originally introduced similar provisions to those in Schedule 1 of the Bill on 5 May 2020 using a temporary instrument-making power which was inserted into the Act as part of the government’s response to the coronavirus crisis (“COVID-19”) and the provisions were subsequently extended in September 2020 for a further 6 months.
Schedule 1 of the Bill contains enhancements to the temporary relief previously introduced by making further amendments to section 127 of the Act so that execution under section 127(1), including remote witnessing of the fixing of a company seal, may now be done electronically. In order for the electronic execution to be effective the method must:
- identify the person and their intention to sign the document;
- be on a copy or counterpart of the document that includes the entire contents of that document; and
- be reliable and appropriate for the purposes (or be proven in fact to have fulfilled that purpose).
It is important to be aware that the amendments do not change the practical requirement for companies to retain a copy of executed documents. Notably where split execution occurs (whether physical or electronic), copies of each executed document should be retained. Given the express requirement of the amendments regarding signatures to be affixed to the entire document, the entire signed document should be retained (and not just the signature pages).
Schedule 2 of the Bill permanently introduces a 'fault' element to our continuous disclosure laws introduced in May 2020 so that companies and their officers will only be liable for civil penalty proceedings where they have acted with 'knowledge, recklessness or negligence' in failing to update the market with price-sensitive information.
These reforms are intended to insulate directors from opportunistic class actions, and otherwise expired in March 2021. The threat of these actions make it substantially more difficult for companies to release forecasts of future earnings or other forward-looking estimates, thereby limiting the amount of information available to investors.
The practical application of these temporary measures allows a wide range of methods to be used to sign documents. Companies and directors should be aware that the Bill is not prescriptive on how remote witnessing is to occur. If you have any hesitations on the best approach for remote witnessing and document execution reach out to our Commercial Team on 8414 3400 who can provide you with our best practice approach.
These provisions enable companies to carry on with conducting business while adhering to public health regulations put in place to deal with COVID-19 and are a welcomed practical response to ensure companies are able to maintain a level of business continuity.