Company notices in electronic form

While we are accustomed to declaring a contract valid based on its physical existence, our increasing shift to online communication and documentation requires us to review our definition of a document’s ‘validity.’

The United Nations Convention on the Use of Electronic Communications in International Contracts (New York, 2007) establishes the general principle that communications are not to be denied legal validity solely because they were made in electronic form. Currently, there are only six parties to the Convention, namely the Congo, Dominican Republic, Honduras, Montenegro, the Russian Federation and Singapore.

Taking the abundance of automated message systems into account, the Convention specifically allows for the enforceability of contracts entered into by such systems, including when no natural person is involved in the individual actions carried out by them. It is also interesting to note that the Convention further clarifies that a proposal to conclude a contract made through electronic means and not addressed to specific parties amounts to an invitation to deal, rather than an offer in which acceptance binds the offering party.

While the Convention does not have a great number of parties who have acceded to it, other jurisdictions have enacted laws with similar principles. On 10 December 1999, the Electronic Transactions Act 1999 came into force in Australia. Section 15 of this Act is similar to articles 11 and 12 of the Convention. The spirit of this Act was embraced by the Australian Stock Exchange, which published guidelines for notices of meetings in August 2007. These guidelines state that companies should endeavour to send notices of meeting to shareholders by electronic means if requested and should place the full text of notices and accompanying explanatory material on the company website.

The New Zealand’s Electronic Transactions Act 2002 and Electronic Transactions Regulations 2003 (SR 2003/288) is another example, which came into force on 21 November 2003. The Act and Regulations set out the rules to facilitate the use of email and other electronic technology, both in business and for interaction between government and the public. Its primary feature is its allowance for businesses to use electronic technology, if they wish, to comply with various legal requirements for producing, giving or storing information in writing, provided the person who is given or receives the information (if there is one) consents to this.

South Africa, too, has embraced electronic transactions, albeit with some restrictions. On 1 May 2011, the South African Companies Act 71 of 2008 was passed into law. It provides that if, in terms of that Act, a notice is required or permitted to be given or published to any natural or corporate person, it is sufficient if the notice is transmitted electronically directly to that person. However, the Companies’ Regulations restrict the manner in which such notice may be published electronically to sending the notice by electronic mail. The South African High Court is, however, permitted to authorise a different means of giving or publishing such a notice by way of substituted service.

The South African Companies Act also states that if, in terms of that Act, a document, record or statement, is to be published, provided or delivered, it is sufficient if an electronic original or reproduction of that document, record or statement is published, provided or delivered by electronic communication via electronic mail or as the High Court may otherwise authorise. This means that communications and contracts through social media, as another form of electronic media, should not and cannot be denied legal validity on the basis that they were devised in electronic form. However, while legislation may evolve over time, it is safe to say that whether an electronic document is binding is something that should be left for each jurisdiction to determine independently.

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