Section 127 of the Corporations Act 2001 (the Act) sets out the rules around executing company documents. A company is a legal entity with the ability to sign legal documents. However, as a company cannot physically complete this task, someone from the company will have to execute the documents on its behalf.
Section 127 of the Act creates a way for members of the company to execute documents for it. However, it should be noted that for section 127 to apply, the execution must be followed precisely according to the provisions or else you may end up rendering the document unenforceable.
Keep reading to find out more on execution company documents under section 127 of the Corporations Act.
How Can I Execute Documents As A Company?
A company can execute documents by following the regulations under section 127 of the Corporations Act or by referring to the rules set in their own Company Constitution.
Companies often choose to execute documents in accordance with section 127 as the protections and rules that follow will also apply to all documents they sign. There’s more on this below, so keep reading!
What Does Section 127 Of The Corporations Act Say?
Section 127 of the Corporations Act provides that a company can execute a document with either:
- Two directors of the company, or
- A director and a company secretary
Do I Need A Common Seal For Section 127?
No, a common seal is not essential. Executing without a common seal still requires having the same members of the company executing the documents that are stated above.
However, if you do use a common seal, you need approval from the board of directors to do so.
Does Section 127 Apply To Deeds?
Yes, section 127 does apply to deeds. A company can execute a deed under the provisions, as long as the document is expressed to be a deed.
The execution does not require a witness and again can be signed by a director or a secretary.
Why Should I Execute A Document Under Section 127 Of The Corporations Act?
Executing a document under the provisions provided under section 127 allows certain advantages that are not necessarily available should a company decide to execute documents another way (though they are definitely able to).
Section 127 provides protection regarding assumptions and authority – let’s take a look at this in more depth.
Implications Of Using Section 127
If a document has been signed in accordance with section 127, then it allows parties to assume that the document was executed in compliance with the Company Constitution.
It can also be taken as knowledge that the company has also complied with their obligations under the Act.
Actual Vs Ostensible Authority
Actual authority is when it is expressly declared that a particular person has the authority to conduct a certain matter.
Ostensible authority, on the other hand, lets a third party assume that the employee conducting business with them is authorised to do so. This is usually the case where that employee does not have explicit, actual authority to do so.
A third party is under no obligation to clarify the matter and is not responsible if it turns out otherwise. When signing a document under section 127 of the Act, actual and ostensible authority can be reasonably assumed.
Can I Sign A Contract Electronically?
Yes, a contract can be signed electronically. According to the Act, both contracts and deeds can legally be signed electronically. Not only is this more convenient and efficient, but it can also be a much safer way to sign a contract.
This is due to the fact that electronic documents are much more difficult to tamper with once they have been signed. At Sprintlaw, we offer our members unlimited access to our e-signature tool for all their online documents.
On this platform, you can keep all your documents in one, secure place for easy e-signatures. Check out our Sprintlaw membership today.
Electronic Witnessing In NSW
If the execution of a document requires having a witness present, then this can also be done electronically. There are some rules that need to be followed to make electronic witnessing legal.
Electronic witnessing must be done with an audio-visual medium, where the witness can see and hear everything as they would if they were physically present. An electronic witness still has the same duties, such as confirming identity as an in person witness and the virtual signing should allow for this to be completed.
What Are My Obligations Under The Corporations Act?
It’s important to follow the provisions under section 127 precisely and completely. Not doing so could jeopardise the validity of the documents that have been executed.
Furthermore, companies have a number of obligations under the Act. These include:
- Reporting to the Australian Securities and Investments Commision (ASIC) for any changes to the company
- Complying with director duties
- Exercising company powers in a legal manner
- Conducting business in accordance with the law
We highly recommend talking to a legal professional regarding your obligations under the Act to make sure your company is functioning in a legal manner.
Executing company documents under section 127 of the Corporations Act can be highly advantageous if done correctly. If you have any questions, we highly recommend speaking to a legal professional so they can help in getting everything right.
It’s also useful to have any contracts reviewed by our team of expert lawyers. From Supply Agreements to Deeds of Assignment, we’ve got you covered.
To summarise what we’ve discussed:
- A company can enter into contracts, however, certain employees can also sign on the company’s behalf
- Executing a document (with or without a seal) requires either two directors or a director and a secretary
- Sole directors that do not have a company secretary can also execute company documents
- Section 127 applies to deeds as well
- Executing documents under section 127 allows for assumptions regarding compliance and authority
- Documents such as contracts and witness signatures can be executed online
If you would like a consultation on section 127 of the Corporations Act, you can reach us at 1800 730 617 or email@example.com for a free, no-obligations chat.
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