Electronic signatures: COVID-19 and 'business as (un)usual'

The global crisis is forcing businesses to evolve, shaking-up established practices and challenging employees to rapidly adapt. Whilst banks and businesses are constantly evaluating their transaction processes, the lockdown and the adoption of homeworking raises particular challenges around how to perform actions that traditionally would have required a physical presence, in a way that is legally robust.

A welcome solution

On a corporate finance transaction, documents can range in length from one to over 500 pages long. At completion, these documents need to be printed, signed and scanned with hard-copy originals being circulated to parties by post. For those without a home-printer, scanner or even the ability to leave the house, the traditional completion process is simply no longer feasible.

Electronic signatures present a welcome solution to one of the challenges of homeworking – having the means to process transactions away from an office environment. No printer is required, no scanning is needed and staying at home is not a problem. So what are they and how do you use them?

What is an electronic signature?

As determined by the Law Commission of England and Wales in a 2019 report, electronic signatures can take a variety of forms:

• a person typing their name into a contract or email with contractual terms;
• a person pasting a scan of their signature into a soft copy contract in the execution block;
• a person clicking an "I accept" tick box;
• a person using an electronic signature platform to click to insert a typed or handwriting font into the execution block; or
• a person using a e-pen or finger to sign their name on a tablet.

Which method should I use?

The laws of England and Wales do not prescribe a particular form or type of signature to be used. However, when determining how to issue an electronic signature it is important to consider the level of certainty that can be given that the correct person has signed the document and that the document has not been fraudulently executed.

Online e-signature platforms seek to address this issue by encrypting a document with meta data which helps to verify the identity of the signatory. This gives increased evidential-weight to the electronic signature process.

Will my signature be legally binding?

An electronic signature is capable of being a legally valid method of executing documents (including deeds) under English law provided that:

• the person signing the document (or the person on whose behalf it is being signed) intends to sign and be bound by the document;
• any formalities required by law are satisfied, for example any requirement for a witness to attest the signature and apply their own signature to the document; and
• relevant legislation, case law or contractual arrangements do not specify otherwise.

Is it admissible in legal proceedings?

The Law Commission has confirmed that an electronic signature is admissible in legal proceedings. It is admissible, for example, to prove or disprove the identity of a signatory and/or the signatory’s intention to authenticate the document.

Can all documents be signed electronically?

Not all documents can or should be signed electronically and there are a number of limitations of which to be aware.

• Registries and regulators: These have their own rules about the execution of documents electronically. For example, if a document requires registration at HM Land Registry it must have a "wet-ink" signature, for example a legal mortgage would not be capable of being registered at HM Land Registry if it was executed electronically. Furthermore, if taking share security, blank stock-transfer forms should also not be signed electronically in case they need to be submitted to HMRC.
• Place of signature: If anything turns on the place of signature or location of the document, for example tax considerations, then parties will need to consider whether it is appropriate to sign electronically.
• Company limitations: Companies can restrict the ability to sign electronically by drafting restrictions into their articles of association which should be checked prior to signing.

Can I be sure that a company has validly approved entry into the documents?

Financial transactions generally require the delivery of a suite of corporate authorisations by the borrower and all other obligors, which will include board minutes, shareholder resolutions and directors' certificates. Each of these documents can be validly executed electronically. However, consideration should be given to whether electronic specimen signatures in a director's certificate will be appropriate if directors will be using wet ink signatures to issue further documents in the future such as compliance certificates and utilisation requests. We are supporting our clients to reach sensible workarounds and compromises in these unprecedented times.

Another party to the document is located in a different jurisdiction, can they sign electronically?

For contracts governed by English law, overseas legal entities must execute documents in accordance with the laws of the territory in which they are incorporated. As with any other transaction involving overseas obligors, an opinion from a lawyer in that jurisdiction will be required.

I need to execute a deed, how do I get my signature witnessed?

To witness a document, a person must record, on the document itself, that they have observed the execution of the document by the signatory. For a deed to be validly witnessed electronically, a witness may electronically sign the attestation clause under the signature clause, using any form of electronic signature. However, the witness must be physically present when the deed is signed; it is not sufficient for the witness to view the events via video link for example.

Who can witness my signature?

While it is best practice for a witness to be entirely independent of the signatory (for instance, not a partner or friend), this may not be practical if the need for self-isolation arises. However, to be legally admissible a witness (to any document except for a will) must be:

• over the age of 18;
• not be a party to the deed; and
• not have a personal interest in the provisions of the document.

Osborne Clarke comment

Facilitating electronic signatures is just one of the ways in which we are helping our lender and borrower clients continue to get deals done during this period of social distancing. There are many practical difficulties in processing transactions from our homes, and we will support our clients in finding innovative and pragmatic solutions so that we can all continue to practice business as (un)usual as far as possible.

As a firm we have been completing corporate transactions and finance transactions for a number of clients using electronic signatures for some time now, and we are encouraging all of our clients to consider using electronic signatures for all transactions where this is possible during the current Covid-19 crisis, since completing transactions using a more conventional signing process will be, at best, difficult.  Our preferred approach is to use a market-leading electronic signature platform, DocuSign, which gives our clients the best available comfort that the correct signatory of their counterparty has in fact signed the relevant document(s).