Background
In August 2021, the Commonwealth introduced the Treasury Laws Amendment (2021 Measures No.1) Act 2021 (Cth) (TLA) which amended the Corporations Act to allow companies and registered schemes to electronically execute documents (including deeds) as well as hold meetings physically and virtually (so called hybrid meetings) and entirely virtually if allowed by the company constitution. These amendments are set to expire on 31 March 2022.
On 10 February 2022, the Commonwealth passed the Corporations Amendment (Meetings and Documents) Bill 2021 (Cth) (Bill), establishing a permanent mechanism to allow companies and registered schemes to execute documents electronically and hold hybrid (in person and remote) meetings and use technology to execute, sign and share company and meeting related documents.
Important Amendments – Execution of Documents
The Bill inserts a new Part 1.2AA – Signing Documents into the Corporations Act, which inserts the following provisions:
- Section 110(1) – which provides that Part 1.2AA will apply to a document (including a deed) to be signed by a person exercising the powers of a company under section 126 or under section 127.
- Section 110(2) – which provides that Part 1.2AA will also apply to a document (including a deed) required or permitted to be signed by a person under the Corporations Act that relates to a meeting of members of a company or a registered scheme or a resolution to be considered by the directors or members of a company without a company or a meeting of the directors.
- Section 110A – which allows a person to sign an electronic form of a document using electronic means, so long as the method of signing satisfies section 110A(2).
- Section 110B – which creates a prohibition on ASIC refusing to receive or register a document that has been signed in accordance with section 110A on the basis that the document is not signed.
The Bill also amends the following provisions:
- Section 126 – the Bill amends the power of an agent exercising company power to make contracts and execute documents.
- Section 127 – the Bill adds a note to this section providing that the requirement to sign may be satisfied electronically.
Important Amendments – Meeting Documents
The Bill inserts Division 2 – Technology neutral sending of documents to be sent to, among others, directors, members and auditors and related matters, which inserts the following provisions:
- Section 110C – which provides that Division 2 applies to any covered document sent to a person from a company, a responsible entity of a registered scheme or a disclosing entity. A covered document is defined in section 110C(2) and includes:
- a document that relates to a meeting of members of the company or registered scheme,
- relates to a resolution to be considered by members;
- an annual financial report of a company; and
- a notice of members rights.
- Section 110D – which provides that a covered document may be sent to a recipient electronically.
Important Amendments – Meetings
The Bill inserts the following sections:
- Section 248D – which provides that a directors meeting may be held using any technology consented to be all directors. This consent may be a standing consent.
- Section 249R – which provides that a company may hold a meeting of members physically, virtually and physically (a so called hybrid meeting) or entirely virtually if allowed by the company’s constitution.
- Section 252P – which provides that a registered scheme may hold a meeting of members physically, virtually and physically (a so called hybrid meeting) or entirely virtually if allowed by the company’s constitution.
- Part 2G.7 – Independent Report on polls – which provides a mechanism for members who hold at least 5% of votes to request that the company appoint an independent person to observe the poll at a meeting and prepare a report on the conduct of the poll.
When will the Bill take effect?
The Bill will take effect on the day it gets Royal assent and no later than 1 April 2022 (aligning with the expiration of the TLA amendments).
What do you need to do?
This Bill will reduce the uncertainty regarding the use of technology when executing document and deeds and conducting virtual meetings. Seeing as it makes the previous mechanisms introduced under the TLA 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.
It is still important to ensure the requirements of the Bill are complied with when using electronic means for the execution of documents or conducting virtual meetings of shareholders of companies (including AGMs), directors of companies and members of registered schemes. For example, under the TLA, we recommend including particular wording in the boilerplate provisions of agreements and (particularly) deeds where electronic execution is being relied on and will continue to recommend including such language during this transitional period.
This article was written by Sam Dwyer, Partner and Alex Fielden, Law Graduate.
