Written by Alyce Evans and Jennifer Tutty, Principal

In the past few years, the digital landscape has boomed. As the spread of the pandemic saw people across the world confined to their homes, Zoom became the new normal. Fast forward to 2022 and the metaverse is on the rise, Web 3 is on the way and technology continues to evolve at a rapid pace.

Fortunately for companies and agents signing documents on their behalf, the law regulating the execution of documents is also changing.  

In 2020, temporary changes were made to the Corporations Act 2001 (Cth) (Corporations Act) in response to COVID-19, allowing companies to sign certain legal documents electronically.

Now, these changes have been made permanent by the Corporations Amendment (Meetings and Documents) Act 2022 (Cth) (Amending Act), which came into effect on 23 February 2022.

When it comes to companies, electronic contracts and signatures are here to stay.

What is an Electronic Contract?

Electronic contracts (also known as digital contracts, online contracts or e-contracts) are digital versions of legal documents. They can be sent to others via the Internet or other forms of digital communication. Electronic signatures can be used to execute (sign) these contracts.

Just like traditional pen and paper contracts, electronic contracts can be legally binding.

What Does This Mean for Companies?

Effectively, the Amending Act adds a new section 110A to the Corporations Act, which allows documents (including deeds) to be signed by companies (or on behalf of companies, by their agents) electronically.

This means that the documents themselves can be in electronic form (rather than a printed page) and the person signing can do so through electronic means (such as a digital signature).

Additional Changes

Counterpart Documents

The new rules also do not require parties to an agreement to sign the same copy of the document as the other parties. They also do not need to sign their copy in the same way.

This means that one party could use a digital signature to sign an electronic copy of a contract, while another party can print out a copy and sign it by hand.

The two signed, separate copies of the contract (known as counterparts) will together form an executed contract.  

Agents

Under the old legislation, if a company wanted to appoint an agent, they would have to do so formally through a deed. This would give the appointed agent power to sign documents on behalf of the company.

This section of the Act has now been repealed, which means that a company no longer requires a deed to appoint an agent. This further simplifies the process of companies entering contractual arrangements.

Why Does This Matter?

These changes bring flexibility and accessibility to the making of contracts. By streamlining this process through technology, it makes the law more accessible to businesses. Entering into a written agreement is something that we would advocate for whenever an agreement is discussed between two parties, therefore we welcome these changes.

More Changes to Come

On 1 April 2022, further changes will be made to the Act, which will also deal with the increasing use of technology in the operation of businesses. This will include (amongst other things), provisions dealing with members meetings.

Written by Alyce Evans and Jennifer Tutty, Principal

Further Information

If you have any questions about contract law or entering into deeds and agreements as a company, please contact us through our online form or via email at hello@studiolegal.com.au.

DISCLAIMER

The information in this article is of a general nature. It does not constitute formal legal advice, and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.