In the past few years thanks to the Covid19 pandemic, the digital landscape has boomed, and in turn, to adapt to the digitalisation of society, the federal government have responded by passing new legislation to expand the scope of electronic signing and permit it as a permanent method of execution of documents by a company.
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.
As of 23 February 2022, these changes have been made permanent by the Corporations Amendment (Meetings and Documents) Act 2022 (Cth) (Amending Act). So we can officially say that 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. These contracts can be sent to others via the Internet or other forms of digital communication. Electronic signatures can be used to execute (sign) these contracts.
Like traditional pen and paper contracts, electronic contracts are now officially 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 electronically by companies (or on behalf of companies, by their agents).
This means that the documents themselves can be in electronic form rather than a printed page, and the person signing can use a digital signature.
The new rules now do not require parties to an agreement to sign the exact copy of the document as the other parties. They also do not need to sign their copy in the same way – i.e. 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. Once both copies are signed, they will together form an executed contract.
Furthermore, under the old legislation, if a company wanted to appoint an agent, it would have to do so formally through a deed to give the agent power to sign documents on behalf of the company. This part of the Act has now been revoked, meaning a company no longer requires a deed to appoint an agent – further simplifying the process of companies entering contractual arrangements.
Why This Matters
While many of these changes may have become standard practice for your company over the last two years, the Act makes permanent several temporary changes to the Corporations Act that have been embraced by companies trying to conduct business in the socially-distanced world of the COVID-19 pandemic. These changes bring flexibility and accessibility to the making of contracts and streamline the process through technology, making the law more accessible to all businesses.
Contact the Clearpoint Legal team today to find out how you can access our legal support to support your business growth without fearing ‘legal landmines’.