Can Companies Sign a Deed Electronically?

As a result of the COVID-19 pandemic, the Government has introduced several measures to address the difficulties faced by many businesses. One of those measures was an exception to the requirement that a person signs a deed with wet ink. For many businesses, the ability to sign a deed electronically was a welcome change that simplified this process. This is especially the case for parties that could not sign the deed in the same location. In addition, with 2021 bringing further lockdowns and restrictions on the movement of individuals, the Government reintroduced temporary legislation in August 2021. These additional changes enable companies to execute documents electronically, including deeds.

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Difference Between an Agreement and Deed

The two main types of contracts are:

• agreements; and
• deeds. 

The primary difference between a deed and an agreement is that for an agreement to be legally enforceable, you must give the other party something of value in consideration for their promise. Typically, the value would be in the form of money. For example, Cate pays Carl $50 to clean her car. 

On the other hand, a deed only requires a promise or commitment to do something, and there is no requirement for consideration.

Common examples of deeds include:

• bank guarantees;
• intellectual property assignments for no value between related entities; and
• deeds of settlement.

Formal Requirements When Signing a Deed

You must follow several formal requirements when executing a deed to ensure. These requirements ensure the deed is valid and enforceable (which differ from an agreement). These include that the deed must:

• be in writing.
• have a seal on the document. Nowadays, deeds tend to state that each party has “signed, sealed and delivered” the deed. As such, you do not need to physically place a seal on the document.
• be delivered to the other party to the deed. The deed will be deemed effective from the date it is ‘delivered’. Typically there is no requirement to actually deliver the deed document from one party to another. As a general rule, a court will presume that a correctly executed deed has been ‘delivered’ unless circumstances show otherwise.

Additionally, there are circumstances where you need to have a witness view the signing of your deed. For example, suppose you are signing a deed for a personal matter (as opposed to as a company). Hence, in some Australian states, you must sign the deed in the presence of a witness. That witness needs to be an individual who is not a party to the deed. 

Further, for companies, either two directors or a director and a company’s secretary must sign the deed. There is no requirement for a separate witness to sign the deed when signed on behalf of a company.

Can Companies Sign a Deed Electronically?

Before the COVID-19 pandemic, another formal requirement in most states was that a party must sign a hard copy of the deed with wet ink. However, due to the Covid-19 pandemic, there have since been some temporary measures in place. 

Notably, under the Corporations Act, companies can now electronically sign deeds, provided that they meet several criteria. 

When electronically signing a deed with another business, for you to rely on the other party’s execution under the Corporations Act, you must be satisfied that:

• a method is used to identify the person signing the document, and they indicate their intention to sign the document;
• each copy or counterpart of the deed contains the entire document; and
• the method used to sign the document is reliable and appropriate for the purpose for which the document was generated or communicated, in light of all the circumstances. You can achieve this by using a reliable document execution platform such as Docusign.

Additional Considerations

The amendments to the Corporations Act allow companies to execute deeds electronically. However, you should still make additional checks to ensure that you or your company can electronically sign the actual type of document. 

Key Takeaways

At present, you can sign a deed electronically due to changes to the Corporations Act, so long as you meet particular criteria. However, once those laws expire, this may no longer be the case. Notably, different states and territories in Australia follow an inconsistent approach to the signing of documents. Hence, it is prudent to get legal advice before executing a deed electronically, so you can ensure its proper and valid execution.  

If you need help with executing deeds or any other form of contract, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

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