The COVID-19 pandemic has brought with it many challenges. One of the challenges faced by businesses has been how to work around the social distancing restrictions that have existed in various forms over the course of 2020. In this post we briefly explore one aspect of this – whether, and how, documents may be signed electronically.
The aim of this post is to give a high level overview of what in theory can be done, and some practical points to consider. Advice should be sought where you are not certain about how a document should be signed.
The legal starting point
The first question to answer is whether, from a legal perspective, documents can be signed electronically. The answer to this is that in most cases they can be (see below for more detail).
In March of this year, Robert Buckland MP, the Justice Secretary, in responding to the Law Commission’s report on electronic execution of documents stated:
“the existing framework makes clear that businesses and individuals can feel confident in using e-signatures in commercial transactions’; and that ‘electronic signatures […] are permissible and can be used in confidence in commercial and consumer documents”
What is an electronic signature?
I should point out at this stage that in referring to e-signatures or electronic signatures, I am referring to the following forms recognised by the Law Society:
- a person typing their name into a contract or into an email containing the terms of a contract;
- a person electronically pasting their signature as an image into an electronic version of the contract in the appropriate place;
- a person accessing a contract through a web-based e-signature platform (e.g. DocuSign or Adobe Sign) and clicking to have their name in a typed or handwriting font automatically inserted into the contract in the appropriate place; and
- a person using a finger, light pen or stylus and a touchscreen to write their name electronically in the appropriate place in the contract.
All of these forms of electronic signature are admissible in evidence. The evidential strength of the signature will depend on the facts.
The other way to sign documents by virtual means, but not referred to as electronic signing, is by signing in “wet ink” and sending a scan of the signed document. This is a long established and accepted method of signing documents, but we have found that many people lack printing and scanning facilities at their homes which has led to the increase in usage of electronic signatures.
Using a combination of methods
A document can be validly signed using a combination of electronic signatures and “wet ink” signatures.
The position for some common documents
- Simple contracts can be signed using an electronic signature.
- Deeds can be signed using an electronic signature, but signatories need to ensure that when they send their signature they send it alongside the entire Deed.
- For English companies, the following are capable of being signed with an electronic signature, subject to the company’s articles of association:
- Board minutes
- Directors’ written resolutions
- Members’ written resolutions
- Minutes of proceedings at general meetings
But note that shareholder consent in advance is required in order to communicate with shareholders via electronic means.
- In theory Companies House will accept forms signed electronically, however practically this may not always work. The approach should be checked with Companies House before documents are submitted with electronic signatures to avoid risk of rejection. Auditors should be consulted to check they are comfortable with electronic signatures being used for directors’ statements and company accounts.
- There are more restrictions in place in relation to documents requiring registration with HM Land Registry
In some cases it may be necessary or preferable for a witness to sign a deed – e.g. where an individual is signing, or only one company director is available.
They key point to note is that the witness must be physically present to see the signatory electronically signing the document. Witnessing cannot take place via a video feed.
The witness can attest electronically or in “wet ink” – there is no need for the witness to sign the document at the same time as they witness the signing.
The witness must not be a party to the document. Prior to COVID-19, it was seen as best practice for the witness not to be a family member, however there is no legal restriction and most practitioners, including Mayer Brown, now consider that it is appropriate for spouses, civil partners and other adult family members to witness.
Please note, however, that statutory declarations can be administered remotely.
Other things to be mindful of
When signing or arranging the signing of documents, you should:
- Check that the people signing are authorised to do so.
- Check that the constitution of any companies signing does not restrict how documents may be signed.
- Check that you or any other parties do not have any internal policies which may cause an issue (e.g. around data security).
- For foreign entities, consider taking local law advice.
- Consider where the document is being signed as this can be significant for tax purposes.
We strongly recommend consulting your legal adviser before signing or arranging the signing of any significant or less straightforward documentation.