15 February 2021
Radar - February 2021 – 2 of 2 Insights
With much of the corporate workforce working from home, electronic signatures and virtual executions have come into their own.
The Company Law Committee of the Law Society has published Q&As on how to use electronic signatures and complete virtual executions.
A key issue remains how to witness electronic signatures (and real signatures in a socially distanced world) but the Law Society has some suggestions and the Q&As provide some useful reminders of the current position.
The Q&As should be read alongside the 2016 Law Society practice note and the earlier 2010 note as well as any sector-specific or document-specific requirements, which may preclude using electronic signatures, for example on wills and statutory declarations.
Does a witness need to be physically present at the location of the signatory or can they witness via video link?
A witness must be physically present to validly witness the signature of a deed (whether or not the signature is electronic). Possible options while social distancing is necessary include witnessing through a window or in an outside public space.
Can a witness apply the electronic signature of a person entering into a deed to enable the witness to physically witness the application of the signature when not in the same place as the signatory?
No. The witness would effectively be signing on behalf of the person entering into the deed and would not also be able to act as witness.
Can a spouse, child, other family member, solicitor or advisor witness a signature?
They may unless they are also a party or the document explicitly requires the witness to be an independent person. The evidentiary veracity may, however, be diminished where the witness is closely related to a signatory or is a minor. A solicitor or advisor may also act as witness.
If a notary is required, do they need to witness the signature physically in order to notarise it?
If an individual signatory is known by the notary, it may be possible to not sign in the physical presence of the notary where the notary can be confident they can confirm the identity of the signatory and that their signature is genuine. This would be subject to the laws of the relevant overseas jurisdiction.
Is there a preferred method of electronic signature?
While a number of methods are legally effective, as a practical matter the parties should consider the evidential weight of a particular method in demonstrating the signatory's intention to sign. Using an electronic signature platform is evidentially strong as it is secure, resilient to fraud and typically generates a tamper-proof completion certificate. Depending on the method used, it may be helpful to collect and keep supporting information although there is no legal requirement to do so.
Can you achieve valid signature by attaching a contract to an email and indicating signature/agreement in the body of the email?
Yes, provided the contract does not need to be executed as a deed, there are no other formalities relating to execution, and it doesn't have to be filed with a registry. The email should contain a statement that it constitutes signature or agreement to the attached document and include the signatory's typed name or email signature. Alternatively, the signatory can type their name into the soft copy. This is an effective electronic signature but may not be best practice in terms of evidentiary weight.
Can one person apply another's signature electronically (eg a PA on behalf of a Director)?
Yes where the signatory is acting as an individual, provided valid authority has been given to insert the signature. In the case of a deed, this can only be given by deed. For simple contracts, written authority should be obtained from the individual whose signature is being applied. The CLC considers, however, that this approach is not valid where a deed or document is executed by a company because s44 Companies Act 2006 requires signature "by" and not 'on behalf of' a company director or secretary.
Can company documents be executed using different counterparts?
Documents requiring more than one signature can be executed either in counterpart or consecutively and using any valid method of signature except where the document is a deed executed by company seal in the presence of two directors. Both directors will need to be physically present to witness the application of the seal and should therefore sign on the same counterpart.
If you use an electronic signature platform, should you or do you need to adopt Mercury-style virtual signings?
Use of an electronic signature platform should not be considered as an additional protocol to the three Mercury-style protocols but an option 1 protocol. Because the signature page is embedded in the document rather than sent under cover of the same email, deemed confirmations should be obtained from each party whether by way of email or through the platform, or both.
Can you use a combination of execution methods?
Yes. You can have a variety of execution methods on different counterparts which would each count as originals. There are a number of good practice recommendations around confirming originals.
Can you use electronic signatures on board minutes and resolutions?
Yes. Where, however, electronic signatures are used to facilitate board decisions made outside a physical meeting of the directors, consideration should be given to any concerns in relation to the tax residence of the company. Evidentiary weight should also be considered.
Do articles of association or board resolutions need to authorise use of electronic signatures?
No. This is not necessary and the best approach is not to refer to electronic signatures as the drafting may make their use more restricted than required.
Is it necessary for documents to contain a statement that electronic signatures are legally valid?
Can you compile a PDF original version of a Mercury-compliant signed document consisting of an undated execution document plus signature page into which you can insert a date?
Yes. This would produce additional soft copy originals – one represented by the final PDF version and signature returned by email, and the other by compiled copy. There would also be a hard copy original resulting from any printout. In each case, any original would be a counterpart. Any composite version created by attaching all the signature pages would be an evidential version only.
Is any additional evidence required of electronic signature or witnessing?
There is no legal requirement to obtain additional evidence. Execution formalities are either complied with or not. However, in certain areas registrars may demand levels of evidence of the validity of electronic signatures beyond those required for wet ink (eg the Land Registry).