Reading time: 6 minutes

Company directors are responsible for many decisions that chart a company’s course. As a director, your obligations include overseeing management affairs and maintaining proper company records. In particular, you must ensure your company executes documents correctly. Failing to execute a document properly may mean that it cannot be legally enforceable. In the case of a company, it may even lead to personal liability on the part of the directors. This article explains the execution requirements for company documents and the consequences that may arise if your company executes documents incorrectly.

Directors' Duties Complete Guide

If you are a company director, complying with directors’ duties are core to adhering to corporate governance laws.
This guide will help you understand the directors’ duties that apply to you within the Australian corporate law framework.

Download Now

Types of Legal Documents

To understand the execution requirements for a document, it is first important to distinguish between the types of legal documents you may be entering into. In the course of business, you are most likely to encounter documents that take the form of an agreement or a deed. 

The major difference between the two is that you do not need to provide consideration for a deed to be binding. Whilst an agreement requires the passing of mutual promises, a deed is one party’s promise to do something without receiving something particular in return. In other words, a deed typically contains a one-sided promise. So, it has much more stringent execution requirements that your company must follow for it to be binding. 

The execution requirements of a legal document can be found in the Corporations Act 2001 (Cth). 

Form of Legal Documents

The form of a legal document is often just as important as the document’s contents. Depending on the form of the legal document, there will be different execution requirements.

Execution of a document refers to the correct, legal process of making a document or contract legally binding. A company can execute a document in four main ways:

  • having two company directors, or one director and one secretary, sign the document;
  • using a ‘common seal’;
  • having an authorised agent sign the document; and
  • another way outlined in the company constitution.

The consequences of incorrectly executing a document may not always be fatal. However, it is important to understand the execution requirements to avoid lengthy disputes about the enforceability of a document. 

Defective Executions of an Agreement

The execution requirements that apply to you will depend on your business structure. 

Suppose you are a sole trader or a proprietary company with a sole director who is also the company secretary. In this case, the agreement simply requires your name and signature to be executed properly. In the case of all other companies, the Corporations Act requires that an agreement be signed by either two directors of the company or one director and one company secretary. You can learn more about the execution requirements which apply to you when executing agreements in our Legal Guide to Executing Agreements

Notably, a mistake when executing a contract or agreement is not necessarily fatal to the agreement. If the parties can prove that there was an intention to create a legally binding relationship, this may be sufficient for the contract to be enforceable.

For example, the parties begin to perform their obligations under the agreement. Alternatively, if they signed the agreement, although not in accordance with the Corporations Act, this could indicate their intention to be bound.

Further, the importance of correctly executing an agreement is twofold for a company. For one, there is the potential for a court to find the agreement unenforceable. In addition, the director who incorrectly executed the agreement may be personally liable to perform the contract’s obligations. This would be the case if the director signed the contract on behalf of the company. 

Defective Execution of a Deed  

As mentioned, a deed has more rigid execution requirements than an agreement. Failing to execute a deed properly means that the deed will be unenforceable. 

For a deed to be legally binding, it must:

  • be in writing; 
  • have a seal on the document; and 
  • be delivered to the other party.

You can properly execute a deed by affixing the company’s common seal (ink stamp) to the document.

Two company directors or one director and one company secretary must witness the common seal being stamped onto the document. Alternatively, in the case of proprietary companies, the sole director (who is also the company secretary) must be a witness. 

Parties often bypass the requirement to have the company seal on the deed by inserting the words “signed, sealed and delivered” into the execution block. Notably, it will not be fatal if you fail to attach the company seal to the deed. However, you must ensure you abide by other corporate law requirements. Likewise, the deed should include words to the effect of “signed, sealed and delivered”. 

Executing a Document per Your Company Constitution

You may still have a legally binding document if you execute the document as per the provisions of your company constitution. When doing so, you should include a true or authentic copy of the company’s constitution to verify the right to execute a document in that manner on behalf of the company. 

Key Takeaways

Correctly executing a legal document is a small formality, but is key to creating a legally binding arrangement. Businesses must execute legal documents according to the requirements set out in the Corporations Act, or for companies, per the company constitution. Importantly, correctly executing documents helps to avoid disputes later on. 

Further, if your company executes documents incorrectly, you risk a court finding the contract unenforceable and not legally binding. You also risk being personally liable to perform the contract’s obligations. 

If you need help understanding your corporate governance responsibilities, our experienced business 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.

Frequently Asked Questions

What does it mean to execute a document?

Execution of a document refers to the correct, legal process of making a document or contract legally binding. A company can execute a document in four main ways. It can have two company directors, or one director and one secretary, sign the document. Alternatively, it can use a common seal or have an authorised agent sign the document. Further, it may also execute a document through another method contained in the company constitution.

What happens if my company executes documents incorrectly?

If your company executes documents incorrectly, you risk a court finding the contract unenforceable and not legally binding. You also risk being personally liable to perform the contract’s obligations. 

Webinars

Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

Online
If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Online
Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Online
Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Online
Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Online
Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Online
Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Online
Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

Online
As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Harmanjot-Kaur
Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards