Due to the current climate working from home is becoming increasingly more important, creating an increased need for signing documents electronically. Below are some of our suggested solutions to getting your documents signed efficiently following on from guidance published by The Law Society and the Law Commission.
Q: What are electronic signatures?
- A person can type or use an electronic pen or image of their signature to sign their name into a contract or email;
- Using a scan of their signature and pasting it into an execution block;
- Using a digital signature software to sign documents on a computer or other electronic device;
Simple agreements and contracts can be signed electronically without implementing any further requirements as long as there is the intention to give authenticity to it. These types of documents tend to be those which are not required to be executed as a deed.
Documents that are subject to specific statutory 'formalities' or requirements can also be signed using electronic signatures. Documents stating that they must be executed in "writing" or "signed" are included in this.
Q: Do I need to ask the signatories their permission to sign electronically?
You don't have to, but it is advisable to do so to protect yourself from any subsequent challenge to its validity.
Companies may want to pass a resolution or keep a record of the parties' express written consent by email beforehand or within the terms of the documents. This is to evidence their intention to record their agreement by electronic signature and that this electronic signature will have the same legal effect as if it were signed in wet-ink.
Q: Can you sign deeds using an electronic signature
Yes – to ensure the execution of the deed is valid, electronic signatures must be signed in the physical presence of a witness. A video-link is not acceptable. The entire document must be returned in whole to the appropriate party, not just the signature page. However, it is acceptable for parties to print the signature page separately, sign, scan and attach it to the same email as the full final document for return. Consent should be given within the email to attach the signed signature page to the rest of the final document (which is also enclosed by way of approval). These practices avoid any later disagreement about which versions were final and whether the whole document was approved in that form. Signature pages should never be pre-signed and later attached to different versions, as a signature is an indication that the signatory intended to be bound by the terms they have signed to, in whatever form.
Where one director is executing a deed on behalf of a company, he/she should do it in the presence of a witness or by two directors or a director and the company secretary. These signatures can be completed in counterpart to meet the requirements of the execution of a deed by a company.
Q: One or both parties are signing on behalf of a company, is there anything I need to know?
You should check the company's constitutional documents (its memorandum and articles) for any prohibition or procedural requirements which apply to the signing of documents, which could be a particular form or by a specified authority. For example, the requirement for the use of a company seal may make an electronic signature invalid, although these are now rarely used.
Q: What type of documents cannot be signed electronically?
HMRC are not accepting electronic signatures, as they expect to stamp a wet-ink version of the document.
The Land Registry still requires wet-ink signatures on documents they require to be sent to them in paper. Therefore, if a company needs to complete on a transaction, it will require wet-ink signatures in physical form rather than electronic scanned copies.
Below are some examples where the Registry may require wet-ink signatures:
- Deeds to be registered at the Land Registry
Companies House will not accept electronic signatures in typed form for any documents. However, they have confirmed that as long as the party submitting a signed document is comfortable that it has been signed according to the governing law, they will accept certified electronic copies of an original to register it. You still need the original wet-ink in your possession. Electronic signatures in a manuscript by hand or automatically generated are acceptable.
Q: My contract is cross-border, will my signature be valid in other jurisdictions?
You should always seek local advice to check all legal requirements for valid execution will be met before the execution takes place. Our international network of offices is well placed to provide this. As above, any relevant foreign registries or regulatory body signature requirements should be checked, and you should be careful not to fall foul of any applicable rules as to the location of the document's execution such as for a transaction to qualify for tax relief or incentives.
Q: What are the risks and practical considerations?
Particularly, risks are associated with corporate or commercial contracts where the stakes could be high. If a dispute over a signature's validity arose - for example, to enforce security or sue for breach - parties must be careful to consider whether the e-signature they wish to rely on is secure, reliable, practical and cost-effective in all the circumstances, with no potential for the challenge of its reliability. Any practical issues need to be resolved in advance, e.g. necessary access to printers/scanners/software, availability of witnesses and sufficient IT security.
E-signatures are recognised in the eyes of the law as valid executory tools, although parties seeking to rely on them should give careful consideration to the practicalities of their use. You should assess the potential risk and cost of any subsequent challenge to their validity and take proportionate measures to protect against these. As always, the safest option is to seek express agreement and statements as to their valid use and intended effect on both sides.
The commercial team at Vistra Corporate Law is well-positioned to advise on this, so please reach out if you need any advice or reassurance.
Originally published 24 April, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.