Legal Update: Changes to the Corporations Act 2001 assist businesses during COVID-19
On Wednesday 6 May 2020, the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Cth) (the Determination) came into effect, modifying the operation of the Corporations Act 2001 (Cth) (the Act) in response to COVID-19. The Determination will be repealed in 6 months but in the meantime, it will allow company officers to validly execute agreements and deeds electronically, and hold meetings, such as annual general meetings and creditors’ meetings, entirely online while public health restrictions are in place.
The novel changes, which are not retrospective, will see amendments to the operation of section 127 and Chapter 2G of the Act.
Section 127 – Execution of documents by the company
The Determination will allow company officers to sign documents electronically. As we have previously blogged, in regular circumstances a company cannot validly execute a deed electronically. A wet-ink signature is usually required, which has been difficult to obtain during the COVID-19 pandemic as signatories have been working remotely and without access to office technology such as printers or scanners.
The Determination provides:
- A company may validly execute a document without a common seal if any two directors, a director and company secretary, or the sole director/company secretary of a proprietary company:
- signs a copy, or counterpart, of the document in physical form; or
- uses an electronic communication which reliably identifies the person and indicates the person’s intention about the contents of the document.
The copy, counterpart or electronic communication must include the entire contents of the document but need not include the signature of another person signing the document.
Chapter 2G – Meetings
It has been difficult to hold physical meetings in venues under the social distancing restrictions currently in place in Australia, especially with respect to annual general meetings.
The Determination will allow companies to:
- hold annual general meetings or other meetings prescribed under the Act online;
- notify shareholders of annual general meetings via email or other technologies; and
- reach the quorum with shareholders attending online.
This will continue to give shareholders the reasonable opportunity to participate, vote, and raise questions with the board.