Australia’s Digital Commerce Reforms Continue

Treasury Laws Amendment (Modernising Business Communications) Bill introduced

On 17 February 2022, the Federal Government introduced into Parliament the next tranche of legislation to modernise business communications within the Treasury portfolio – the aptly named Treasury Laws Amendment (Modernising Business Communications) Bill 2022.

The Bill follows on from an Exposure Draft that was issued for consultation in late 2021. The Bill has a number of important improvements compared to the Exposure Draft, resulting from what appears to have been a largely effective consultation process.

It builds upon, and in some cases revises, the provisions of the Corporations Amendment (Meetings and Documents) Act 2022, which was passed on 10 February and came into operation on 23 February. For more information about that Act refer to our update Australia makes it to the 21st Century – permanent corporate digital measures passed by the Senate.

Documents to be filed under the Corporations Act

The Bill expands the new document execution rules to any document required or permitted to be signed by a person under the Corporations Act 2001 (Cth) and provides that documents to be filed under the Corporations Act by ASIC (or the new Registrar) cannot be rejected just because they were signed electronically. This is a significant advance and it is surprising that it took Australia this long to do that.

Extension to Chapter 6

Most importantly for M&A practice, the Bill will extend the digital commerce reforms allowing electronic delivery of documents under Chapter 6 – the takeovers provisions. This is also a long-overdue measure. Electronic rather than paper delivery has been permitted in connection with mergers by way of schemes of arrangement by Australian courts for some time and the cost, logistics and ecological impact of posting bulky paper documents are an unnecessary burden on bidders, target companies, shareholders and the community.

The extension to Chapter 6 has brought with it some new provisions dealing with the implications of electronic delivery, such as limits on the uses to which members’ electronic addresses can be put once disclosed to a bidder. Importantly, the members’ electronic addresses can only be used “in relation to the bid” under threat of a civil penalty - of up to 10,000 penalty units or $2,220,000 for each breach - so the misuse of a register involving (say) 10,000 names and addresses would result in an almost unimaginable maximum civil penalty.

The Bill will (thankfully) preserve the understanding on which Chapter 6 has operated until now – that the provisions that operate on the time or fact of “sending” or “giving” documents are referring to the time or fact of despatch rather than receipt.  Any other solution would have been unworkable in the extreme – but it does mean that the general rules under the Corporations Act about the time of delivery of electronic communications will not apply to Chapter 6.

Lost members

The Bill also contains new provisions dealing with “lost” members, so that companies and schemes do not have to continue sending notifications and documents if they have satisfied certain conditions including a reasonable belief that they do not have a current address, and taking reasonable steps to ascertain a current address.  Exactly how one should discharge the reasonable steps onus in relation to the last point is not clear, but no doubt practices will develop over time as companies and schemes seek to comply with the new provisions.

The Bill improves on the Exposure Draft, in response to consultation, so that the relief will apply for 18 months after the conditions are satisfied and then cease unless the sender has taken reasonable steps to advise the “lost” member that sending of documents has been suspended but can be resumed if the “lost” member provides a current address.

Directors meetings

In yet another version of section 248D, the Bill will further facilitate directors’ meetings using technology. This is probably not necessary since in 2022 it would be absurd to say that a video conference was not a “meeting” in ordinary language, but no harm will be done by having express provisions - unless a Court was to interpret new section 248D as a “code” and not give effect to provisions that appear in corporate constitutions. Unfortunately, there is nothing in the Bill or Explanatory Memorandum that expressly supports the view that section 248D is meant to be facilitative rather than exhaustive.

Other Amendments

The Bill will make a number of amendments to other Treasury portfolio laws, including the National Consumer Credit Protection Act (underpinning the National Credit Code), and will make a swathe of amendments to laws that currently require newspaper notifications.

The Bill uses the expression “accessible to the public and reasonably prominent” and for a non-Commonwealth Government entity, where required in a manner determined by the relevant regulator. While the Explanatory Memorandum provides some helpful examples of when a website publication will and will not satisfy the new expression, we predict some significant uncertainty as companies and schemes and others try to implement the new generally expressed requirement. We would have preferred a more “bright line” test or some clearly delineated safe harbours so users do not have do grapple with the general and perhaps vague nature of the test in the Bill.