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Using E-Signatures in Place of Handwritten Signatures to Sign Legal Documents

Using e-signatures in place of handwritten signatures

 

During the Covid-19 pandemic, the use of e-signatures has assumed a greater importance, as business continues to be conducted remotely, and many people, at the time of writing, remain working from home.

Pandemic or not, the need for signatures on business documents such as contracts remain a key business process – either by hand (‘wet ink’) or digitally. With managers needing to continually adapt their business model to new rules of working – the ability to sign these items digitally is crucial.

What is the current legislation?

The UK introduced electronic signatures through the Electronic Communications Act 2000, to give firms the option of using digital signatures. However, the use of e-signatures falls under the 2016 EU eIDAS Regulation, (Electronic Identification and Authentication and Trust Services) – which established an EU-wide legal framework for electronic signatures. At the end of the Brexit transition period, according to the ICO, “eIDAS will no longer apply, but the government intends to incorporate the eIDAS rules into UK law.” So although the post-Brexit legislative landscape is not yet settled, we can assume for now that the contents of the eIDAS will continue to apply.

E-signature or digital?

Guidance issued during the pandemic by Companies House recommends the use of digital signatures or those provided by digital signature providers, such as DocuSign.

Acceptable digital signatures should be 100% verifiable, backed by a Digital Signature Certificate, with a traceable audit trail, unique digital fingerprint, and digital identification. In contrast, e-signatures are a digitalised version of a handwritten signature without any digital certificate that can trace and audit the signature.

Therefore, it may be prudent to choose digital signatures over e-signatures, if the business would benefit from the security of having a digital certificate and audit trail.

UK guidance on usage

In the UK, the Law Society Practise summarised best practice for managers on the use of e-signatures in its note, “Execution of a document using an electronic signature”:

  • By hand: an additional wet-ink version is not required, although there may be practical reasons for doing so, or if a document is outside English law.
  • Simple contracts: there are no restrictions on the use of electronic signatures.
  • Documents subject to specific statutory requirements (for example, contracts relating to the sale of land; guarantees; promissory notes; assignment of copyright): electronic signatures can be used where the documents are:
    • “in writing” – which merely means words reproduced in a visible form; and
    • the “signature” being any mark intended to give authenticity to the document, meaning that any of the forms of electronic signature can be used.
  • Minutes and members’ statutory written resolutions: these can be signed electronically but if the minutes need to be submitted to a foreign jurisdiction, wet ink might be required depending on the local laws.
  • Deeds: Where an agreement is executed as a deed (for example being signed by two directors or one director and one company Secretary), in most cases (see below for exceptions), the signature itself can be an e-signature if it satisfies the requirements above (i.e. document is in writing and the signature is intended to give authenticity to the document). However, it is the requirement of witnessing that can prove difficult to achieve remotely as the witnessing individual would need to genuinely observe the signing. It therefore continues to be best practice for the witness to be physically present, to avoid evidential burden of proving that the signature was genuinely witnessed.

For company directors and other key personnel the option to use digital signatures, causing one less disruption to their business processes, is, at this time to be welcomed.

Bridgehouse Company Secretaries has a team of industry experts that offer a range of company secretarial advice to suit businesses of all sizes and types. Contact us on 0845 055 8260 or email info@bhcsecretaries.co.uk to see how we can help.

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