COVID-19 and electronic signing: the current state of play

Temporary laws have now been passed to address issues relating to the signing and attestation of documents during COVID-19 in almost all Australian jurisdictions. 

The legislative changes put in place over the preceding months go a long way in reducing the uncertainty of electronic execution of documents for corporates and individuals alike. This article sets out those legislative changes, provides an overview of those changes in the context of general commercial deeds and agreements and makes ‘best practice’ recommendations to reduce the risk of unenforceability and fraud when contracting electronically.

Commonwealth – Overview of legislative changes

Australian companies are now permitted to electronically execute documents with signatures from two officers or a sole director and company secretary and others may rely on the standard statutory assumptions as to due execution contained in section 129(5) of the Corporations Act 2001 (Cth).  

The new rules, contained in the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Cth) (Determination), expand execution by a company under section 127 of the Corporations Act to cover:

• company officers using electronic signatures (such as pasting a copy of a signature into a document, signing a PDF on a tablet, smartphone or laptop using a stylus or finger or a digital signature which incorporates an authentication element – most often cryptographic authentication technology);
  
  
• executing a document in electronic form;
  
  
• executing counterparts or copies of the contract in physical form (which would include split execution by officers); and
  
  
• using electronic communication which reliably identifies the person and indicates the person’s intention about the contents of the document.

The physical or electronic document or communication must include the entire contents of the document but need not include the signature of another person signing the document.

The Explanatory Statement provides that the Determination now facilitates the entire process of executing a document using electronic communications, so long as a method as reliable as appropriate to the circumstances is used to identify each person and his or her intention to execute the document on behalf of the company. 

New South Wales, Victoria and Queensland permit the making of deeds in electronic form. However, notwithstanding the Explanatory Statement, there is currently differing opinions as to whether the Determination does permit electronic execution of deeds in other jurisdictions given the paper, parchment and vellum rule for deeds. While this continues to be an evolving and complex area of law, there are now a greater variety of options available for execution of deeds and agreements. 

States and Territories – Overview of legislative changes

In New South Wales, Victoria and Queensland, deeds and agreements may be executed electronically by individuals. In New South Wales deeds can be witnessed via audio visual link. Deeds do not need to be witnessed in Victoria and Queensland. In contrast, in the Australian Capital Territory, South Australia, Western Australia and the Northern Territory, while individuals may not execute deeds electronically, they may execute agreements electronically. 

In light of the nuances of each jurisdiction’s legislative regime, caution should be taken and advice sought as to the specific requirements in the relevant jurisdiction. Some of the notable differences include: 

• Types of documents that may be witnessed via audio visual link: The types of documents that may be witnessed via audio visual link vary in each jurisdiction. For instance, in the Australian Capital Territory, the temporary amendments permitting witnessing via audio visual link applies to affidavits, wills, health directions and a general power of attorney or enduring power of attorney. In contrast, in New South Wales, the temporary amendments permitting remote witnessing apply to a will, a power of attorney or an enduring power of attorney, a deed or agreement, an enduring guardianship appointment, an affidavit including an annexure or exhibit to the affidavit and a statutory declaration. It is therefore crucial to check whether the law as amended extends to the document you propose to execute.
  
  
• Requirements for witnessing of a document via audio visual link to be effective: While in our previous article, we outlined the requirements for witnessing via audio visual link in New South Wales, the requirements for a document to be effectively witnessed varies from jurisdiction to jurisdiction. For instance, in Queensland, the witness must be a ‘special person’ (for example, an Australian Legal Practitioner or Notary Public). In Victoria, New South Wales and the Australian Capital Territory, there is no equivalent to a ‘special person’ requirement. However, in those jurisdictions, the witness is required to provide a statement accompanying the signature (as described in our previous article). Even among those jurisdictions, the content of each statement and where that statement must be included differs. This highlights the importance of obtaining advice as to the applicable requirements in each relevant jurisdiction. 

Practical guidance and risks – Electronic signing and exchange

Precautionary steps can be taken to minimise the risk of an unenforceable document. The process and level of authentication required will generally depend on the identity of the parties, risks associated with the document, value of the transaction and likelihood of dispute. We suggest parties consider the following practical risks and procedural steps to minimise fraud and enforceability risks.

Method of electronic execution

An electronic signing platform, such as DocuSign, is a prudent method of executing documents electronically given it is able to satisfy the general law requirements of identification, reliability and consent by signatories. A properly established DocuSign process does not involve any greater risks (e.g. identity fraud) than wet ink execution and will generally be accepted by the Courts. We do not recommend pasting digital signatures into documents or the use of computer styluses (including fingers) to sign on electronic versions of the document given these methods attract a higher risk of identity fraud.  

It is also advisable to follow the following steps when executing documents electronically:

• each document should be circulated by the lawyer directly to the personal email address of the authorised signatories in full (not just the signing page);
  
  
• the authorised signatories should sign the documents in the relevant signature block (to be appropriately witnessed where necessary);
  
  
• the documents should not be dated;
  
  
• after signing, the authorised signatory should reply to the sending lawyer confirming they have executed the documents; and
  
  
• when you wish to exchange signed documents, email a PDF of a fully signed copy of each document or counterpart, plus the email confirmation from each authorised signatory, to the other lawyer. 

Fraud risk 

While electronic execution does not increase the risk of fraud over and above the risks which attend wet-ink execution per se, the practical issues that arise are of an altogether different nature. The key means of mitigating the risk of fraud are strict adherence to compliance protocols. As noted, a properly conducted DocuSign process is usually a reasonable means of minimising fraud risk. In circumstances where the risk is towards the higher end of the spectrum, it is prudent to also conduct identity checks and confirm the signatory’s intention to be bound by the document.  

Electronic execution clause

Electronically signed documents do not require a clause where the parties consent to execution by electronic means. However, it is advisable to include this in documents as it minimises arguments as to whether the parties have consented to execution by electronic means. 

Foreign corporations

The legislative instruments do not alter the position of a foreign corporation not registered in Australia – there is no Australian law which prescribes how foreign corporations should execute deeds or agreements. Where possible, it is prudent to have counsel licenced to practice in the relevant overseas jurisdiction confirm that the execution mechanics comply with local execution requirements for that type of entity. 

When do COVID-19 electronic execution legislative changes cease? 

Set out below are the key enactments and regulations made in response to COVID-19 outlined in this article which relate to electronic signing of documents and their expiry date. 

While these temporary laws are in force, if a deed or agreement is made and has a governing law in New South Wales, Victoria or Queensland, then it can be signed electronically (subject to any special requirements for that type of document). However, the rules in this area are complex and evolving, and it is prudent to obtain advice on how a document can be duly executed reliably and appropriately in the circumstances having regard to where the document is signed, the governing law of the document and type of document being executed.