The recent shift from office base time to working from home and enforced social distancing measures in the current coronavirus pandemic (“Covid-19”) has raised a number of issues for signing and executing key documents, particularly when a witness is required to be present. Following our article published in June 2020, on effective ways to execute contracts electronically during Covid-19, this article provides a brief summary on the latest updates on ways to effectively sign contracts during the current pandemic. Please click here to check out our article.
On 26 June 2020, the Corporate Insolvency and Governance Act (the “Act”) entered into force. The Act gives the Government various additional temporary powers, until April 2021, in order to ease some of the administrative burdens for companies. As a result of these temporary changes, Companies House has now confirmed that companies and certain other corporate bodies can hold virtual meetings of their members (before the Act came into force, there was some uncertainty over whether these meetings would be effective).
WHERE ARE ELECTRONIC SIGNATURES PERMITTED?
Companies House have recently changed their policy to allow for documents to be accepted, including forms and resolutions that have been signed by e-signature in response to the Covid-19 crisis.
HMRC have also temporarily put measures in place to allow the acceptance of certain electronically signed documents and is also accepting stock transfer forms and instruments by email (rather than post).
In the current situation, many people are unable to physically sign documents, and might have the additional complication of having limited access to printers and scanners. As a consequence of the current social distancing guidelines, witnessing signatures has been practically and logistically challenging.
The easiest solution has been to sign contracts electronically, including the use of electronic signatures to execute agreements.
In March 2020 the Government responded to the Law Commission’s report, published in 2019, on the electronic execution of documents (the “Report”). The Government agreed with the majority of the findings in the Report and, in particular, that electronic signatures can be used to validly execute documents, provided that there is an intention to authenticate and any other execution formalities are satisfied (i.e. any statutory requirements such as that the signature be in a specific form or that the signature be witnessed are complied with). As such, electronic signatures are admissible as evidence in legal proceedings.
The Report also sets out the existing status quo in English law on electronic signatures, which is based on the Electronic Communications Act 2000, the EU electronic identification and trust services Regulation (“eIDAS Regulation”) and case law relating to electronic and non-electronic signatures.
According to the Law Commission, where there is a requirement for a deed to be signed “in the presence of a witness“, this means that a witness must be physically present to witness a deed being signed.
In the absence of any clear legislation, it is generally agreed that witnessing a deed via video-conferencing is not currently permitted. In respect of current social distancing measures, a witness will need to stand at least two meters away from the signatory while they sign the deed.
As set out in our previous article, there is an exception when deeds are signed by a company. Both companies and limited liability partnerships can create a deed without the need for a witness, if two authorised signatories, such as two directors, sign.
In response to Covid-19, HM Land Registry has been reviewing its practice, policies and procedures and has recently began accepting deeds that have been signed using the ‘Mercury signing approach’, which will remain as another way of completing a deed. In respect of land registration, this means a signature page is signed by ink pen and witnessed in person (video conferencing is not accepted). The signature is then captured with a scanner or a camera, to produce a PDF, JPEG or other suitable format. Each party then sends a single email to their conveyancer to which the final agreed copy of the document and the copy of the signed signature page is attached.
Additionally, from 27 July 2020 HM Land Registry will now accept ‘witnessed electronic signatures’. A ‘witnessed electronic signature’ is the replacement within a standard deed of a wet-ink signature with an electronic signature. As such, electronic signatures may now replace the ‘wet ink’ signature requirements within a standard deed that is to be submitted to HM Land Registry. A witness is still required to be present, but he/she can now also ‘sign’ electronically. In practice this means that a signatory may now electronically sign a document in the physical presence of a witness who then also signs the document electronically.
The Government is introducing legislation to allow people to use video-conferencing technology for the witnessing of wills being made. Per statutory requirements, the signing of a will still requires a ‘wet ink’ signature’ on physical documents; however, in order to make the will signing process easier, the Government has announced temporary and retrospective laws (for wills created from 31 January 2020 onwards) to allow the witnessing of wills to be conducted via video conferencing, in a five-stage process as per Government Guidance.
The type of video conferencing or device used does not matter, so long as the will maker and their two witnesses each have a clear line of sight of the writing of the signature. To reflect this, an amendment could be added to the will stating that the witnesses have witnessed the signatory signing the will remotely. Please note that electronic signatures are not permitted.
Companies and certain other corporate bodies can hold virtual meetings until 30 September 2020. This includes general meetings of their members, meetings of any class of members (i.e. meetings of a certain subset of the corporation’s members) and meeting of delegates appointed by members.
This applies to various types of corporation, including companies formed and registered under the Companies Acts, building societies, friendly societies, charitable incorporation organisations, co-operative societies and community benefit societies.
Until 30 September 2020:
- meetings do not need to be held in any particular place, and there is no need for any particular number of people to be in the same place;
- meetings can be held, and votes taken, electronically or by any other means; and
- the Act gives the Government power to modify how a notice of meeting is made available, as well as the form of notice and the deadline for sending it.
How do these provisions interact with a company’s articles of association (“Articles”)?
These provisions override anything in a company’s constitution or in legislation. They also apply to all meetings since 26 March 2020, effectively “ratifying” any meetings that have been held electronically since then.
It is important to note that these provisions do not apply to board meetings. Companies will need to check their Articles to see whether virtual board meetings are permitted.
What about Annual General Meetings (“AGMs”)?
Public companies (whether listed or not) and certain other corporate bodies that need to hold an AGM between 26 March 2020 and 30 September 2020 can now hold their AGM any time on or before 30 September 2020.
Although the Government confirmed earlier this year that there are no immediate plans for reform, given the current economic climate, the Law Society has opened consultations with the Government and the Solicitors Regulation Authority to discuss how best to address legislative and regulatory concerns regarding the execution of various documents. Therefore, in the absence of new legislation and, as the use of video conferencing to witness electronic signatures for deeds is still being considered as an alternative solution, it is best to ensure all deeds are signed in the physical presence of a witness.
For the Government’s Guidance on the five step process to allow for witnessing of wills to be conducted via video conferencing, please clicker here.
For the press release of HM Land Registry accepting electronic signatures, please click here.
For more information, and any guidance or advice on executing your commercial and financial contracts correctly, Cleveland & Co External in-house counselTM, your specialist outsourced legal team, are here to help.