Key changes include:
- Any document required or permitted to be signed under the Corporations Act can be signed physically or electronically.
- Most documents required or permitted to be sent under the Corporations Act can be sent physically or electronically, subject to a recipient electing how to receive documents. However, the new laws do not apply to documents sent to ASIC, or documents related to corporate fundraising or financial services – many such documents can already be sent electronically under other arrangements, but in other cases, physical delivery will continue to be required.
- Takeovers and compulsory acquisition procedures are facilitated by allowing electronic delivery of relevant documents to target security holders.
- Directors' meetings can be called or held using any reasonable technology without the requirement for directors' consent (subject to a company's constitution).
The Treasury Laws Amendment (Modernising Business Communications and Other Measures) Act 2023 (Cth) significantly extends the previous regime allowing companies to sign and send documents electronically. Most of the amendments, including the items discussed below, are now in effect.
This article summarises some key changes to the Corporations Act 2001 (Cth) (Corporations Act) in relation to communications, governance and transactions, but does not cover the full range of amendments under the new Act.
The Corporations Act was amended in early 2022 to allow Australian companies to execute documents in electronic form using electronic signatures. Fortunately, the new laws do not impact this arrangement, and companies may continue the current practice of executing contracts and other documents electronically.
However, there were still circumstances where the Corporations Act required companies to deliver documents physically – the ability to execute electronically does not override such requirements. There were also circumstances where the Corporations Act required or permitted a document to be signed by an individual or an entity other than a company, and did not expressly permit an electronic signature.
The 2022 amendments dealt with the most commonly problematic of these circumstances, allowing documents relating to meetings and resolutions to be signed and sent electronically and annual financial reports to be sent to members electronically, but a number of gaps remained.
Electronic documents generally
The new laws fill many of those gaps so that all documents under the Corporations Act can now be signed electronically and additional documents can be sent electronically.
Electronic signing: Any document required or permitted to be signed under the Corporations Act can now be signed physically or electronically. This continues to allow companies to electronically execute contracts and other documents as permitted by sections 126 and 127 of the Corporations Act. In addition, electronic signing is expressly allowed for other documents that require a signature such as directors' annual reports and declarations and creditors' statutory demands.
Electronic signing will continue to require a method of indicating the signatory's identity and intention which is appropriately reliable in the circumstances. In most circumstances, this requirement can be readily satisfied by various methods that are already common in the market, including the use of scanned signatures or an online platform such as DocuSign.
Electronic delivery: Most documents that are required or permitted to be sent under the Corporations Act can now be sent physically or electronically (whether the Act uses the word "send" or a similar word such as "give", "serve" or "dispatch"). Notably, this does not apply to documents sent by or to ASIC or the Registrar, or documents sent under Chapter 6D (fundraising) or Chapter 7 (financial services and, for example, provisions relating to share certificates and transfers). It does apply to a wide range of documents such as directors' and secretaries' consents to act, copies of constitutions provided to members, and takeover documents sent to target security holders (see below). It was already common practice for some of these documents, such as consents to act, to be signed and/or delivered electronically, but the new laws remove any doubt whether this is valid.
In relation to documents that can be sent electronically, the Corporations Act maintains the existing provisions that:
- A document can be sent physically or electronically or by sending the recipient sufficient information (physically or electronically, e.g. in a letter or "postcard" or by email) to allow them to access the document electronically
- Company shareholders and members of other entities may elect to receive documents physically or electronically
- Annual financial reports can be delivered to members by making them readily available on a website.
For documents that can be signed electronically but not sent electronically, it should generally be acceptable to print the electronically signed document and send it physically.
Many documents were already able to be electronically lodged with ASIC (through the ASIC Regulatory Portal or under its Electronic Lodgement Protocol) and the new laws do not expand the scope of documents which can be so lodged. As noted above, the expanded regime for electronic delivery expressly excludes documents sent to ASIC. In addition, the amendments clarify that ASIC can refuse to receive or register a document that does not comply with any lodgement requirements under the Corporations Act. However, the Act continues to provide that, if such lodgement requirements are satisfied, ASIC cannot reject an electronically signed document on the ground that it has not been effectively signed.
The new laws are particularly welcome in the area of takeover bids and compulsory acquisition procedures, as they allow both bidders and target companies to electronically send documents to holders of securities in the target. As a result, a number of related changes have also been made, including:
- Delivery timing: New provisions specify the time when a document is taken to have been sent, depending on the method of delivery. This can be important given the strict timing requirements for some aspects of the takeover process.
- Security holder details: The previous requirement for a target to give the bidder details of relevant security holders has been extended to include their email address and any election they have made to receive relevant documents physically or electronically. Significant penalties apply if such information is used or disclosed for unrelated purposes.
- Security holder elections: A target security holder can elect to receive documents from the bidder either physically or electronically, by notifying the bidder. More practically, if a target security holder has already notified the target of an election regarding relevant documents, and the target informs the bidder of that election (as above), that election is also taken to apply to documents sent by the bidder.
In relation to schemes of arrangement, scheme booklets could already be sent to security holders electronically under the existing provisions for meeting-related documents, and this continues to be permitted under the new laws (by reference instead to documents sent under Chapter 5 of the Corporations Act).
As noted, lodgement of takeover and scheme documents with ASIC is not covered by the new electronic delivery regime, but such documents can continue to be lodged online through the ASIC Regulatory Portal. Lodgements with the Court will still need to comply with the relevant requirements.
The Corporations Act previously allowed directors' meetings to be called or held using any technology consented to by all the directors. The new laws instead allow the use of any reasonable technology, including wholly virtual directors' meetings, without the requirement for the directors' consent. However, company constitutions that reflect the old provision in the Corporations Act may continue to impose a requirement for consent, and may benefit from amendment if such provisions are inconvenient in practice.
Related content: Australia: No longer wedded to ink and paper - Modernising business communications