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Sign of the times: What you need to know about using electronic signatures to transform your business

Electronic signatures have been replacing their manual counterparts for years, but their use became even more widespread – and necessary – following the onset of the coronavirus pandemic. Throughout 2020, we saw a massive global shift to remote working, requiring workplaces to overcome many practical and technical challenges, including document signing.

Businesses have been embracing the concept of the ‘paperless office’ for many years, hailing its efficiency, convenience, reliability and environmental impact, and with good reason. According to Australian Science, an Australian office will use 10,000 sheets of A4 paper each year, of which 50% will end up as garbage. At the same time, only 3% of Australian businesses have eliminated paper entirely from their office procedures.

Despite the available technology, many companies have yet to fully embrace using it in legal documents. While Australian law mostly allows electronic signatures to be used on documents, there still remains some uncertainty around how legally enforceable they are, and how efficient.

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As such, it’s important that you understand the implications of using electronic signatures before integrating them into your standard company operations. What are the different types? Are they legally binding? Do the benefits even outweigh the drawbacks?

What is an electronic signature?

A traditional (‘analogue’) signature is essentially a visual representation indicating the signatory’s intent of being bound by the document they’re signing.

Electronic signatures follow the same principle and can take a number of forms, including someone typing their name in an email, using a stylus to sign a screen, inserting a digital version of their signature into a document, or using e-signature software such as PleaseSign, DocuSign, or AdobeSign.

Digital signatures, on the other hand, have a more specific technical meaning and require specific technology to authenticate them. They’re a type of electronic signature that is a mathematically generated code attached to an electronically transmitted document, which verifies both the sender’s identity and the authenticity and integrity of the document’s contents.

Are electronic signatures legal in Australia?

Using a pen is considered as valid as typing your name, or cutting and pasting an image of it. Clicking the ‘I Accept’ button for the terms of an online form can also amount to a signature.

The Electronic Transactions Act 1999 (Cth) and its State and Territory equivalents (the ETAs) validate electronic signatures being used as long as:

  • the signatory can be identified 
  • the signature indicates the person’s intent within the document
  • the way it’s signed is deemed reliable in the circumstances (an SMS, for example, may not be), and
  • the other person consents to the person signing electronically – this is usually satisfied by the other person also signing the document.

However, there are a number of areas where the law is unfortunately ambiguous. The first relates to deeds (a special type of contract that must be used in certain scenarios) which generally must be signed on paper and witnessed by someone not a party to the deed. 

Another example is where a company is executing a document under section 127 of the Corporations Act 2001 (Cth) (Corporations Act). There is some uncertainty as to whether a “document” must be a paper document, which would preclude the use of electronic signatures.

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Ditto the witnessing and attestation of documents using electronic signatures. 

Many of these issues have been addressed on a temporary basis during COVID, and there is certainly momentum supporting the need to make these reforms permanent. 

In the meantime, before you establish any systems or processes concerning electronic signatures, make sure you’re across the relevant State and Territory laws to ensure you’re complying with them.

Temporary COVID measures made permanent

State and Territory governments across Australia introduced temporary legislation and regulations in 2020 in direct response to COVID-19. The legislation addressed the challenges in signing and witnessing certain document types, including how documents can be witnessed remotely, as well as how oaths and statutory declarations could be made without being physically present.

In November 2020, the Australian Government then announced that it proposes to ‘make permanent and expand upon’ those temporary changes to the Corporations Act in relation to virtual meetings and electronic document execution.

The benefits of electronic signatures

Given this shift, you should weigh up the benefits and risks of using electronic signatures.

  • They’re more efficient, reducing time taken to print, copy, send and scan hardcopy documents.
  • They’re less likely to be misplaced in the post once signed, so are more secure.
  • Electronic signatures significantly reduce the volume of printed paper and the need to use postage services, so are less of an environmental burden. Copies don’t need to be physically filed.
  • Sending them is free.
  • Electronic signing platforms result in fewer incorrectly executed documents if they are correctly laid out and all required elements (signature, date, consent) are accounted for.

Nothing is foolproof

The same clear processes and policies governing how your company executes contracts (that is, who is authorised to sign particular categories of documents on the company’s behalf), should be applied to electronic signatures. You should keep records showing the signatories themselves are who affixed the signatures (rather than an administrative staff member, for example) so the documents are more likely to be enforceable.

It’s important you document the circumstances in which you will and won’t accept electronic signatures from the businesses with whom you’re dealing (suppliers, distributors, agents and the like). You should do this even if your business isn’t ready to go paperless just yet.

As with any complex legal or administrative matters, it’s advisable that you seek advice from trusted advisers before altering your operations. They will be best able to assess how changing regulations impact your business, and work with you to create safe frameworks within which you can start to incorporate electronic signing, and start to phase out the bulky and costly hardcopy methods of the past.

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Sarah Thompson

Sarah Thompson

Sarah Thompson is a contract law specialist at award-winning Adelaide firm, Peripheral Blue. Dual-qualified in Australia and the United Kingdom, where she worked as an in-house lawyer for a global insurance company, Sarah joined Peripheral Blue in 2017.

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