It is often necessary for intellectual property (IP) rights holders to enter into legally binding agreements with others. For example, when licensing or assigning their IP, rights holders will need to do so with an appropriate legal document.
Section 127 of the Corporations Act 2001(Cth) outlines rules for how a company can enter into a legally binding agreement.
In short, to consider an agreement validly executed:
Section 127 applies even if a company has created their own constitution with their own signing requirements. In this manner, section 127 is the minimum requirement for valid execution.
Failure to comply with the requirements of section 127 can have significant implications for a company.
Pertinently, it can render a contract unenforceable, which can lead to financial losses and damage to the company’s reputation.
The minimum execution requirement for compliance with section 127 will depend on your company structure.
Once you know your company structure, it is easy to comply with section 127 and ensure your company is validly executing legal documents.
The overarching rule:
A company may execute any document, including a deed, if the document is signed by either:
For a proprietary company that has a sole director, that director can sign the document, either where that director is also sole company secretary, or where the company does not have a company secretary.
If the document is a deed, it must be expressed to be executed as a deed. This can be recited in the testimonium above the signature blocks and should be used consistently throughout the document.
If a company has a common seal, it can execute any document, including a deed, by fixing the seal to a document and having that fixing witnessed and signed by the required officers.
Under Section 286 of the Corporations Act 2001(Cth), companies are required to keep accurate records of their financial transactions and other activities. This includes records of any documents executed by the company under section 127. It is important for the company officers to maintain a record of all executed documents, including the date of execution and the names and positions of the officers who signed the document.
The team at Kings IP can prepare and record intellectual property assignments and advise on appropriate terms and signing requirements.
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