Update as at 24 July 2020:
Since this blog first went up in April 2020, legislation has been passed confirming (among other things) that parties to security agreements containing power of attorney provisions can sign those document(s) electronically. The change applies only to powers of attorney signed in connection with a security interest between 21 March 2020 and 16 November 2020 (although the legislation does allow for that timeline to be formally extended if necessary). With lockdown having lifted in NZ (and hopefully staying that way, fingers crossed), companies may find that banks continue to require “wet ink” signatures to security agreements, even with this new law having come into effect.
With everyone in lockdown mode, many businesses used to taking care of their corporate admin face-to-face may be wondering how to approach this brave new world.
We thought a quick breakdown of how to go about signing documents, and passing resolutions, when you can’t meet people face-to-face might help.
You might need to pass board or shareholder resolutions in the next few weeks if you are currently in the middle of the following business activities:
(This article is part of our Covid-19 series. See the full set of articles here.)
You should be able to sign everything necessary to keep your business running during this period electronically.
Solutions can be as sophisticated as traceable digital signatures through DocuSign and other platforms, or as simple as using Adobe Reader in Windows, Preview on a Mac, or taking advantage of the user-friendly tools built into many phones, tablets and laptops.
We’ve also found institutions that would usually require traditional signing processes to be followed are willing to consider practical alternatives. A bank in the last few days was comfortable accepting documents having been witnessed on the basis of us watching the clients sign via a video call, for example.
We understand the NZ Government also plans to introduce legislative changes that will allow parties to electronically sign security agreements that contain power of attorney provisions soon. Until that change is made, powers of attorney remain one of the few categories of document that cannot, under NZ law, be signed electronically. A company is often required to execute a security agreement before it can access bank financing, and powers of attorney are a common feature of security agreements, so we welcome this change.
Whether it’s business as usual, or specific resolutions required to authorise bridge funding for your company, the lockdown shouldn’t prevent you from passing any board and/or shareholder resolutions you need to.
You have two options – in person via Zoom or in writing.
If you prefer holding meetings in person, and would like to stick with that approach as much as possible, you could hold a meeting by conference call or Zoom. Broadly, the same rules and process that apply to an in-person board or shareholder meeting apply to any meeting held by conference call/Zoom.
Different rules apply to written board and shareholder resolutions (more on that below). As long as those different rules will still work for you, practically, we find written resolutions a convenient and practical way to take care of corporate admin.
How do you go about it? Here’s what we recommend:
default rules for board resolutions
The default rule for board resolutions is that a resolution in writing is valid if it is signed or assented to by all of the directors. Keep in mind that a majority isn’t enough – everyone on the board needs to sign or assent.
default rules for shareholder resolutions
The default rule for shareholder resolutions – with a few exceptions* – is that a resolution in writing is valid if it is signed by shareholders who:
(i) make up at least 75% of the voting shareholders by headcount; and
(ii) hold at least 75% of the voting shares.
* The few exceptions apply where: a company is seeking shareholder support to opt out of its obligations under the Companies Act to prepare financial statements, have those financial statements audited, and/or to prepare annual reports. In each case, shareholders holding at least 95% of the voting shares must sign the resolution.
A few things to note about those default rules for shareholder resolutions:
The above isn’t a full breakdown of the rules surrounding written shareholder resolutions (we figure everyone’s already suffering enough). If you have any questions though, we’d be happy to help.
If so then you may prefer kindrik.sg