COVID-19: Execution of Documents: E-Signatures

COVID-19 Business, but not as we knew it

Remote Execution of Documents: E-Signatures

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COVID-19 Business, but not as we knew it:

Remote Execution of Documents E-Signatures

The government’s restrictions imposed in response to the Covid-19 pandemic have raised a number of practical difficulties for parties when signing documents. This article examines the options available when signing contracts remotely.

Johnathan Rees Partner johnathan.rees@laytons.com +44 (0)20 7842 8009

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COVID-19 | Remote Execution of Documents: E-Signatures

Does a contract need to be signed?

Under English law a contract does not need to be made in any particular form. Most commercial contracts can be made informally and are not required to be signed at all. In many cases contracts can be concluded orally or by conduct, provided the essential elements for an enforceable contract are present.

How can a contract be signed?

Where a contract or document is signed, the most common forms of signing are: • “wet ink” signatures (an original or “hard copy” version of a document is signed by the parties who are physically present) • virtual signing (a document is signed by parties not physically present in the same place). There are

may mean that the contract not only has to be in signed and in writing but also comply with other formalities (e.g. if it is a deed).

E-Signatures Electronic signatures are not a new concept. An electronic signature is a signature in electronic form where the person does not physically put pen to paper. Electronic signatures are valid under English law. In its 2019 Report on executing documents using electronic signatures (endorsed by the government in March 2020) the Law Commission for England and Wales stated that an electronic signature is capable in law of being used to validly execute a document (including a deed) provided that: • any formalities relating to execution of that document are satisfied e.g. if a signature needs to be witnessed • the signatory intended to authenticate the document (i.e. intended to sign and be bound by it).

established rules and guidance for virtual signings.

• electronic signing (where one or more of the signatories

It should be borne in mind that the Report did not cover wills.

signs a document by using an electronic signature).

According to the Law Commission electronic signatures do It is possible to combine these different methods for the same

not need to take a particular form or type unless required by

document subject to the applicable rules being followed.

law or contractual arrangements. Accordingly e-signatures can take various forms including:

Accordingly most contracts which the parties choose to record in writing can be validly concluded with an electronic

• the signatory typing their name or initials at the

signature on the basis that there is no legal requirement

bottom of an electronic document (e.g. an email), or in

for signature in the first place. That said, for some types

the signature block of a Word document.

of contract (e.g. guarantees, land contracts or transfers of securities) there may be statutory formalities which the parties must follow if their transaction is to have legal effect. This

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• a scanned handwritten signature incorporated into an electronic document.

• clicking an “I accept” or “I agree” button on a website.

COVID-19 | Remote Execution of Documents: E-Signatures

• using a JPEG image of their signature and affixing that into a contract • using a finger or stylus on a touchscreen.

• signing through an e-signing platform (see e-signing platforms below).

Although it does not affect the legal validity of an electronic signature not all electronic signatures will have the same evidential weight. Similarly not all technology will

Witnessing At the time of writing we are not aware of any relaxation of the position that a witness must be physically present in order to attest a signature.

Accordingly the same witness requirements must be complied with for an electronic signature as if it were a ‘wet-ink’ signing

enjoy the same security and reliability and resilience to fraud.

Clearly typing a name into a document will not be as secure

Clearly in light of the government’s requirement for people to

as using a JPEG image of a signature or signing through

stay at home this requirement will raise logistical challenges.

an e-signing platform. Similarly, certain types of electronic

The Law Commission's advice was that virtual witnessing is not

signatures which will be more appropriate for commercial

possible, so a witness cannot witness via video link.

transactions as they carry a greater level of security e.g. an electronic signature securely linked to the owner should be

There is no statutory requirement for the witness to be

used in a higher value transaction.

independent - there is no prohibition on a signatory’s spouse, co-habitee or civil partner from acting as a witness and it is generally acceptable for a party’s co-director or employee to

e-signing platforms The use of electronic signing platforms can help address concerns relating to the authenticity and reliability of electronic signatures. E-signing platforms use fraud prevention techniques including sending PIN numbers to signatories' mobile phones to access the platform and generate a completion certificate at the end of the signing process. There are however a number of preliminary matters which should be considered:

witness – nevertheless, independent witnessing is always best practice. Remember that a family member could not be a witness if they are also a party to the relevant document.

This best practice is increasingly becoming relaxed in light of the government’s requirement and we have experienced other law firms adopting a pragmatic approach to this point.

Consideration should be given to whether an alternative signing method is available e.g. - in the case of a corporate - two directors sign or a director and company secretary (instead of a director and a witness). It is also worth bearing in mind that whilst the witness must be physically present at the signatory’s signing the witness can attest later i.e. the witness does not need to sign in the presence of the signatory.

• the security of the relevant platform - most are cloudbased – to ensure that it satisfies the parties’ own IT and

Both the signatory and witness can sign electronically.

security policies • obtaining any licences necessary to use the platform • are the parties trained in the use the technology • who is coordinating the platform (this process can be time consuming and affect timetables).

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COVID-19 | Remote Execution of Documents: E-Signatures

Corporate signatories In the case of a corporate signatory there are a number of checks to be made when accepting or using an e-signature:

• whether an electronically signed document would be admissible in court or in terms of any other action in the relevant jurisdiction • does the document need to be notarised or apostilled in another jurisdiction - this may only be possible for wet ink signed documents?

• does the entity have capacity to electronically sign?

• do the articles contain any restrictions on electronic signing?

• does the signatory have authority to sign electronically and apply their electronic signature to the document?

Other considerations and closing thoughts

• does the signatory intend to be bound and sign up to the relevant document?

• does the signatory’s relevant internal risk policies permit it to sign electronically?

• notwithstanding the validity of electronic signatures under English law, it may not be possible to use them in every case • consider whether alternative methods might be available so there is no need for electronic execution.

Cross border transactions There are occasions when the use of electronic signatures will not be suitable e.g. or where legislation or case law prevents it. Cross-border transactions – involving a non-English law party, a non-English law document, or a document which may need to be produced for litigation in another jurisdiction - raise specific issues and the parties should take local legal advice on the validity of electronic signatures in the relevant jurisdiction before executing documents electronically.

Common issues will be: • restrictions in a party’s constitutional documents, the governing law of the transaction or specific laws of a party’s jurisdiction • does the overseas party have authority to sign electronically under the laws of its jurisdiction?

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If the parties have a printer and can print and sign, they can return the signed page either by scan or by photograph • not all parties to the document need to sign using electronic signatures - some can sign in wet ink and others electronically. Different types of electronic signatures can be used • care should be taken to consider any tax implications arising from where the document is signed.

• parties should take legal advice on the particular circumstances to ensure compliance with the relevant law and formalities This is a fast evolving topic. For further information and to confirm the current position please contact Johnathan Rees, Partner Company Commercial.

COVID-19 | Remote Execution of Documents: E-Signatures

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Corporate & Commercial We provide a complete range of corporate and commercial advice and support for clients who extend from start-ups, individual entrepreneurs and family offices to multinational corporations.

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Katherine Beasley

Rebecca Chang

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Associate Partner katherine.beasely@laytons.com +44 (0)20 7842 8000

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Solicitor-Advocate ryan.dsouza@laytons.com +44 (0)20 7842 8000

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Partner john.gavan@laytons.com +44 (0)20 7842 8000

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Partner johnathan.rees@laytons.com +44 (0)20 7842 8009

Partner christopher.sherliker@laytons.com +44 (0)20 7842 8015

Partner cameron.sunter@laytons.com +44 (0)20 7842 8036

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