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29 Sep 2020

NSW launches remote witnessing pilot scheme; Treasurer remakes e-signing arrangements for companies

In good news for businesses, the NSW Parliament has extended the operation of provisions permitting the witnessing and attestation of documents via audio-visual link until the end of 2021. It has done so as a pilot scheme in order to assess whether the changes should be implemented on a long-term basis.

Last week, the Federal Treasurer formally extended existing arrangements that allow documents to be signed electronically under section 127(1) of the Corporations Act 2001 and shareholder meetings to be conducted online until 22 March 2021. This follows the Treasurer's pledge in July that existing arrangements would be extended to assist businesses to continue operating during COVID-19.

NSW introduces pilot scheme

In April, the NSW Parliament introduced temporary modifications to the Electronic Transactions Regulations 2017 allowing signatures on certain documents (including deeds, affidavits and statutory declarations) to be witnessed via audio visual link. Those temporary measures were set to expire on 26 September 2020 but were recently extended for a further 6 months.

In a welcome initiative, NSW has now passed a pilot scheme under the Stronger Communities Legislation Amendment (Courts and Civil) Act 2020 that will run until the end of next year. The scheme preserves the existing remote witnessing arrangements and transfers them to the Electronic Transactions Act 2000. The NSW Parliament has indicated that this will allow sufficient time to assess the effectiveness of the scheme and consider whether longer term reform is required.

Electronic execution by companies and virtual AGMs

In May, the Treasurer made the Corporations (Coronavirus Economic Response) Determination (No 1) 2020 (Cth) (Determination No. 1) pursuant to section 1362A of the Corporations Act 2001 allowing company directors and secretaries to sign documents electronically and shareholder meetings to be convened entirely online. That Determination has now been repealed and replaced by Corporations (Coronavirus Economic Response) Determination (No 3) 2020 (Cth) (Determination No. 3) which extends the arrangements until 22 March 2021.

Importantly, any action taken before the Determination No. 1 was repealed (such as executing a document electronically) is preserved so that it is not required to be repeated. For example, if Director A signed a document on 20 September 2020 in accordance with Determination No.1 and then Director B signs the same document on 30 September 2020 in accordance with Determination No.3, those two actions will constitute valid execution under the modified arrangements.

Like its predecessor, Determination No.3 does not specifically refer to electronic execution of deeds. Accordingly, we continue to take the view that, in the absence of clear and express words which overcome the common law principle that required a deed to be written on paper, parchment or vellum (commonly known as the 'paper rule'), it should only be relied upon as the sole basis to support the electronic execution of deeds as a last resort.

Future reform?

The COVID-19 pandemic has shone a spotlight on the complexities and difficulties of relying solely on a paper based legal framework for signing and witnessing documents. The NSW pilot scheme lays the foundation for permanent reform and we anticipate that other jurisdictions will look to implement similar initiatives in the future.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.