On 23 February 2022 the Corporations Act was permanently amended by the Corporations Amendment (Meetings and Documents) Act 2021 to allow companies to execute documents more flexibly including executing deeds by electronic means and authorising agents with express or implied authority to execute deeds. These changes follow from laws that were introduced on a temporary basis over the past two years during COVID-19. The amendments make permanent the temporary measures, add additional flexible reform over the way that companies execute deeds and remove the requirement for deeds executed under the Corporations Act to be witnessed. The amendments also facilitate companies to use technology to hold meetings and distribute meetings-related documents.
What are the key amendments that I need to know?
Some of the key amendments to the Corporations Act include:
¨ Agents of companies may execute documents, and importantly these documents now include deeds under section 126. The agent does not need to be appointed by a deed to have authority to bind the company.
¨ This overrides the common law position that an agent cannot execute a deed without being appointed by deed and that to be effective the deed must be on paper, vellum or parchment and must be delivered.
¨ Proprietary companies with a sole director and no company secretary may take advantage of the statutory document execution mechanisms with sole directors permitted to sign on behalf of the company under section 127.
¨ From 1 April 2022, companies can permanently hold meetings, including AGM’s wholly in person, partly in person and partly using virtual meeting technology (hybrid meetings) or wholly using virtual meeting technology, providing that is expressly permitted in the company’s constitution. Meeting related material may also be provided electronically to members.
¨ Companies can electronically sign documents (including deeds) that are executed under section 126 or 127 of the Corporations Act or documents that require execution that relate to the meetings and resolutions of members or directors.
What do the changes to section 126 mean for me and my company?
¨ When executing a document binding your company, section 126 now provides that an individual (“agent”) acting with the company’s express or implied authority can execute a document and notably this extends to execution of deeds (which is new).
¨ This means that in respect to execution of deeds, execution does not always need to be done by two directors, a director or company secretary or a formal delegation made under a deed.
¨ However, be aware that the amendments to section 126 do not affect the operation of other laws that requires a particular procedure to be complied with in relation to the contract or document (including a deed). For example, documents requiring stamping or registration may still require execution under section 127.
Implications
The amendments have reduced uncertainty regarding the use of technology when executing documents and deeds and conducting virtual meetings. Seeing as it makes the previous temporary mechanisms permanent, companies now have certainty that the electronic and technological solutions previously adopted in 2020 and 2021 can validly be used well into the future.
While welcome, companies should not expect execution by an agent under section 126 to always be accepted by a counterparty. That is because counterparts may continue to request execution under section 127, such that they may enjoy the assumptions in section 127(5) of the Corporations Act that the document has been duly executed by the company.
Scott MacNeill – Principal & Executive Director GM Lawyers
