Talking Business podcast: remote signing FAQS
In this episode, host Sophie Brookes is joined by legal director Joanna Belmonte to answer all the key questions around signing documents remotely, including via electronic signatures. Together they will discuss the process of signing documents remotely and outline the rules which must be followed to ensure the signed document is legally binding.
In this episode:
- We define electronic signatures;
- We outline what documents you need as a witness to an electronic signature;
- We look at whether documents that require a witness can be electronically signed;
- We look at the procedures in place if a signature is not going to be available;
- We outline how a company executes a deed;
- We outline the rules which apply to electronic signatures;
- We look at the rules and requirements some organizations or public bodies might have in relation to signatures;
- We outline the formal signing platforms which can be used for electronic signatures;
- We list our top tips for dealing with remote or electronic signings.
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Read the transcript:
Sophie Brookes: Welcome to Talking Business, your straight-talking guide to dealing with corporate matters. Whether you are a private or public company, an owner-managed business, or an entrepreneur, a director, company secretary, or in-house counsel, this is the podcast for you. My name is Sophie Brookes and I'm a partner in our corporate team. I was a transactional lawyer for a number of years before becoming a professional support lawyer, which means I'm now responsible for know-how across our corporate team. Each month I'll provide an update on the latest developments that matter to you, and we'll be joined by an expert to take a deep dive into a key corporate law topic.
At the start of the lockdown restrictions back in March 2020, lots of people and organisations, including lawyers had to get to grips with signing documents in different ways. From things like customer contracts to loan agreements, service contracts, shareholder resolutions, all sorts of things, almost everything is now being signed or executed remotely. But you need to get that process right, and you need to follow some basic rules, otherwise, the signed document might not be legally binding. Today I'm going to be asking Joanna Belmonte a legal director and PSL in our banking and finance team for her top tips, the things to be aware of with remote signing and electronic signatures. Okay, Jo, let's start with the basics then. What is an electronic signature?
Joanna Belmonte: There are all sorts of different forms of electronic signature. It can be something as basic as typing your name into a contract or pasting an image of your signature, a photograph of what your signature looks like, can even be using a stylus on a touch screen, like an iPad. There are also more formal ways of applying electronic signatures through specialist web-based platforms, where you can click to have an image of your signature or an electronic signature of your name added to a document.
Sophie Brookes: So there are lots of different forms there, but are all of those different ones legally valid?
Joanna Belmonte: Yes, they are. The law commission reported on this not so long ago. And that confirmed under current laws, these are all fine ways of creating an electronic signature. The main thing is that the person who's signing the document intended to authenticate the document, it was their intention that was them signing the document, also that any other formalities are dealt with, for example, the rules for witnessing are followed. There are some special rules with some types of documents, for example, wills, but we won't go into those today because they are generally in the minority.
Sophie Brookes: Okay. Is there a standard procedure that you have to follow when you're using an electronic signature?
Joanna Belmonte: No. There are no hard and fast rules about what method you use and what procedure you follow, it depends on a number of different factors. It depends on the technology that the parties have available to them. It depends on the type of document you're signing, what is acceptable to the other parties to the transaction as well. And also if there are any other relevant organizations involved, for example, if you've got to lodge something with revenue and customs or the land registry. These are all things you need to check before you start off with using electronic signatures on a transaction.
Sophie Brookes: Yeah. Check before you start is a great tip.
Joanna Belmonte: Absolutely.
Sophie Brookes: Yeah. You mentioned witnesses earlier, so which documents might need a witness?
Joanna Belmonte: Most signatures won't need a witness. Generally in English law it's only execution of a deed, whether that's by an individual or if you've just got a sole director of a company signing on behalf of the company. And they need to be witnessed. Simple contracts don't require witnessing. And there's not many things that have to be done by way of a deed. They include things such as transfers of land, and that also includes charges over land and other assets. Powers of attorney as well is another common one where we see deeds being required.
Sometimes we will use deed for other legal reasons. It might not be a hard and fast rule that a certain document needs to be signed as a deed, but we might do so because of other issues, for example, to cure a lack of consideration. A guarantee doesn't have to be signed as a deed, but often it's very hard to show the consideration between the guarantor and the lender or other beneficiary of that guarantee, so we execute it as a deed instead. You also get a longer limitation period, that's a longer period to make claims if the document has been done by way of a deed, it's 12 years, as opposed to six years that you get under a simple contract. So often it is preferable to have a deed that's possible, but it's not always a necessity.
Sophie Brookes: Those types of special documents where they need a witness, can they be signed electronically?
Joanna Belmonte: Yes, they can be. The signatory and the witness can both sign electronically, that's not a problem. Where we get a bit of confusion though, is people think that just because a witness can sign electronically, that they can also witness electronically, and that is not the case. And the Law Commission was clear on that. The witness has to still physically be in the same place as a signatory, even if they're both applying their signatures electronically on the document. So they can't witness via FaceTime or Skype and then add their signature on their own computer in their own home, they have to be in the same place as the signatory.
Sophie Brookes: Just thinking here about the sort of circumstances we've been in for the last year or so with people living under lockdown restrictions, maybe isolating just with a family member. I can see that if the witness has to be physically present that could give rise to some problems. Who can actually act as a witness?
Joanna Belmonte: Yeah, that's absolutely right. We had a flurry of people checking on this point, when we first went into lockdown. There's actually no legal requirement that a witness has to be independent and that surprises a lot of people. Historically, generally there's been a market practice that witnesses should be independent. The reason for that is, one of the main purposes of having a witness for a document is that they can give evidence that the signatory did actually sign the document if the signatory tries to claim "that wasn't my signature", I never signed that document at some point in the future. It's all about reliability of evidence. But we did find that when we went into lockdown in March 2020, the market shifted, the priorities changed a little bit and people were willing to accept a bit of a more relaxed approach to witnessing.
If a family member was the only person available to witness a document, that was acceptable and it's legally acceptable. It does depend a bit on who their family member is because there could still be that possibility that they have to give evidence at the future. For example, we wouldn't recommend a minor or somebody who's not got mental capacity, perhaps because of illness or their age. We wouldn't recommend them as a witness because they're unlikely to be able to give reliable evidence if called upon. But a spouse certainly, for example, could witness a document. There is one big caveat though, and that is if the person you want to be a witness is also a party to the document, to the contract themselves, then they can't witness.
If you've got a contract that has to be signed in a loan write by a husband and wife, for example, they can't witness each other's signatures in that document. If that's the situation though, we came up with the phrase, 2020 brought us the phrase, window witnessing as well. If necessary, we had lawyers literally, which sounds slightly odd, but going to people's houses and watching them sign the documents through the open window or even a closed window. As long as they could see the signatories applying their signatures, they were able to witness that way too. There are often, ways of cleverly thinking about how we can meet the requirements, but still, get it done even when we're in lockdown.
Sophie Brookes: Yeah. I think a lot of people were having to come up with innovative solutions quite quickly back in March and April. Just thinking about the witness then. Let's say a document got lots of different signatories and they're all signing in front of the same witness, to save the witness having to sign and write their details lots of times, can the witness just sign once for all the different signatories?
Joanna Belmonte: That certainly would make life easier on a lot of transactions if we could, but unfortunately, they can't. The law requires that the witness, witness and sign to show they've witnessed every individual signature, so every signature has to be witnessed separately. However, they don't have to write their signature exactly the same time. So the witness could watch all the signatories apply their signature and then go and sit down and apply their witness signature one after the other, in a chunk.
Sophie Brookes: Right. Okay. So that shortcut isn't available. Thinking about some other things. Again, if you've got a document with lots of different parties to it, and maybe at the moment, people are in different places and don't want to meet up, do all the signatures of all the parties, do they all have to appear on the same document?
Joanna Belmonte: No. In English law, we've got a concept called counterparts, which actually just means you can have separate copies of the same document and each copy can be signed by one or more of the parties. So they don't all need to sign the same hard copy or the same electronic copy of the document. You can even have one person sign a document electronically, and the other one print it out and sign it in what we call wet ink. It's not necessary that they all sign the same actual document, as long as the documents they signed are all identical.
You'll usually have a clause in the document, making clear that it can be signed in counterpart, and that each counterpart can be taken as an original, and if you take them all together, you've got your one entire document. But even if you don't have that clause in, counterparts are still generally accepted in English law. So it's not necessarily that everyone sign the same document. Where things like electronic signatures might be possible for some parties, but not others, that can be really helpful because you may write the copy for the wet ink signature to one party and circulate the electronic copy to the others for them to sign.
Sophie Brookes: Great. I'm thinking now about, hopefully, lockdown restrictions are gradually lifted and people might be able to start thinking about going on holiday again. If a signature is not going to be available for signing, thinking about what they might be able to do, could they sign a signature page, and for example, just authorize somebody to then attach it to the final version of the document whilst they're on holiday, and the documents then gets agreed in their absence, would that be okay?
Joanna Belmonte: It might be okay for a simple contract with some checks and controls in place, but it is definitely not okay for a deed. You can't sign that signature page in advance and just have it attached to the deed that is later agreed. Signing the deed, the signature of a deed has to be part of the same document as to the clauses within the deed, and the signature all have to be part of the same whole. So you can't separate the signature from the deed itself. If you do that, you break the link between the execution and the deed, and there's a really good chance the deed will be invalid.
If someone's not going to be available to sign a deed, then you need to make plans for that, you need to think in advance if that's at all possible, and consider how they might sign the deed. If they're really not going to be available and they can't do it electronically, then they need to probably appoint an attorney to execute it on their behalf once the deed is in an agreed form. But bearing in mind, with the advances in electronic signatures and adoption of the technology, you can sign a deed even through your mobile phone now. So it's much easier than it used to be, to be able to sign and even if you're on the beach somewhere on holiday when we are able to be back on the beach on holiday.
Sophie Brookes: Yeah. Although I'm sure once we're doing that, probably signing legal documents is not going to be the first thing everybody wants to be doing. Okay, let's look at a few company-specific points now if we can, thinking about a company signing a document. So you mentioned deeds, how does a company execute a deed?
Joanna Belmonte: A company can execute a deed either with a single director in front of a witness or two authorized signatories. But the authorized signatories are usually the directors and the company secretary. So you'll have either two directors, or one director and a secretary, it can't just be anybody the company has decided is authorized to sign on its behalf. The board can authorize an individual to sign a simple contract on its behalf, but they cannot sign the deed that way. There is a third alternative that we don't see quite so often nowadays using a company seal. If a company wants to use a seal or needs for any reason use a seal, then the instructions for doing that will be in that company's own constitution. It might say a specified person or director has to sign beside the seal, for example. If you do have a seal as a company, it doesn't mean you have to use it. The law now says that everything that used to need a seal, can now be done using the alternative signing methods of two directors, director and secretary, or director before a witness.
Sophie Brookes: Okay. You mentioned that one of the options that is this sort of two authorized signatory route. If you've got one person which is quite common and certainly in private companies, one person who is both the director and the secretary, can that one person sign the document twice in those two different capacities?
Joanna Belmonte: No, I'm afraid not. The law needs two authorize signatories, so that's two people, not one person in two different capacities. In that scenario, what you'd have is you'd have some signing of the method of being in front of a witness if there wasn't a second director or a separate person who is the company secretary.
Sophie Brookes: Right. Okay. Got it. So we need either two separate people or that single director in front of the witness. What about if we've got lots of companies signing the same document and the same individuals as is often the case, the directors of all of those group companies, can each director sign just once on behalf of all of the companies or again, do they have to repeat that signature?
Joanna Belmonte: I would love to be able to say, yes. I've seen directors have to sign dozens and dozens of documents for dozens of companies before, and it's any wonder they can hold a pen by the end of it, but I'm afraid the answer is, no. Even if you're the director of all the companies, you have to sign for every individual company you're signing in your capacity as director for each of those companies. So I'm afraid you just have to take the time and go and sign for everyone.
Sophie Brookes: Okay. No shortcut there then. Again, thinking about a company using these two authorized signatory method, can the two directors or the director and the secretary, can they sign separate counterparts, as you mentioned earlier?
Joanna Belmonte: Well, this is one of these things in English law that pops up where we don't actually have any legal authority on this, there's no hard and fast rule about it. But really quite recently, the Law Society published some guidance that suggests this is okay, the two directors can sign on separate counterparts. But despite the Law Society guidance, because there's no legal authority, where it's possible it's still best practice to avoid this. For example, instead of signing by two directors who are not going to be in the same place, sign by way of one director in front of a witness. But if you really can't avoid it, it's probably okay.
Sophie Brookes: Okay. So maybe try and find a way around if you can. Again, thinking about the situation where maybe none of the directors are going to be available to sign. Assuming they've approved the document, it's just that they're not available to do the signing, who could sign for a company then?
Joanna Belmonte: But actually, a company can authorize someone to sign on its behalf, and that might be actually express clear authority, or it might even be implied authority. Ideally, if someone who's not a director of the company is going to be signing documents and you're going to be relying on that document, then you probably want to see board minutes that make it really clear that the board has authorized the individual to sign the document on the company's behalf. And that works for simple contracts. Another thing the company could do, if you want it to be more formal, or if you couldn't have deeds is granting a power of attorney to appoint someone as a company's attorney to sign on its behalf. But that power of attorney as I mentioned earlier also has to be signed by deed. So that can be a solution if the issue is just that the directors are not going to be around at the time, but it's not a solution if there's another reason, for example, there's an emergency and for some reason, directors unexpectedly aren't available.
Sophie Brookes: Yeah. Okay. You've touched there on the ability of someone to sign on behalf of someone else in the case of the company, but I was thinking, with electronic signatures, it must be very easy for someone to insert someone else's electronic signature into a document. What are the rules there?
Joanna Belmonte: Yeah. Well, the rules of agency applied to that, so rules we've had around for a long time applied to electronic signatures, just as he did to wet ink signatures. Generally, a person can authorize someone else as their agent to sign a simple contract on their behalf, and that doesn't matter whether they're signing a wet ink or they're applying their electronic signature. But usually, if you could be relying on that document, then for evidential purposes, you want a bit of evidence that the agent has been properly appointed. It's not always essential, but to avoid problems down the line, it's better to get that evidence, even if it's just email confirmation from the party to the contract that they've allowed someone else to apply their signature on their behalf.
When it comes to deeds, so again a bit more awkward. You can only give authority for someone to execute a deed on your behalf by another deed, and almost always this means granting a power of attorney. So if you're signing your deed, you can not let someone apply your electronic signature on your behalf. It has to either be you applying your own electronic signature, or there has to be a power of attorney put in place by way of a deed to allow that other signatory to sign the document instead of you.
Sophie Brookes: Great. Thank you. You mentioned earlier that some organizations or public bodies might have their own rules or requirements in relation to signatures and particularly electronic signatures. Can you tell me about some of those?
Joanna Belmonte: Yeah, absolutely. And this is where planning is really important. Before you dive into signing documents electronically, it's checking that's not going to cause problems, not just legally, but with any of the parties involved in any of the registers. For example, banks are likely to have their own internal requirements about what they will and will not accept electronically signed. Company's house does accept electronic signatures. For example, you could have a PDF of a signed document or an automatically generated signature inserted into a document as long as the signature is legible. But when it comes to forms that companies house. They've got additional little requirements, for example, they don't want a typed electronic signature, even though that would be legally valid, it must look like a manuscript signature. It's a good idea to check these rules in the first place.
The Inland Revenue used to always require wet ink signatures. But when we went into lockdown, they were fairly quick to realize this wasn't going to work for everybody. So they did a temporary change that they would accept electronic signatures for forms that needed to be stamped such as stock transfer forms. However, we don't know how long this temporary solution will last, whether they're going to adopt it permanently going forward or whether it's going to be pulled again when we get back to normal.
The land registry is a particularly tricky one, and that was really tricky when we went into lockdown. Historically the land registry required wet ink signatures. Regardless of the validity of electronic signatures, they wanted wet ink signatures and any deeds needed to be registered, for example, property transfers, charges, and longer leases, but they did give some there too. They worked pretty quickly when we went into lockdown to try and find solutions, and now actually they've got guidance issued that says, we will accept electronic signatures, but there are really quite strict steps that have to be exactly followed when you're using electronic signatures on a document that has to go to the land registry.
Sophie Brookes: Great. Okay. You also mentioned earlier some sort of more formal signing platforms. Can you just explain to our listeners what they are?
Joanna Belmonte: Yeah. These are online platforms, and they give you a secure environment where you can log in and upload documents, and through that platform, the documents are circulated for electronic signature. There's no need for the parties to print them and sign them. They're not being attached to emails for signing and going that way. They're being kept in that one secure environment that the parties then access when prompted. There are a number of different platforms out there, but the names that people are probably most familiar with are DocuSign which is very popular amongst law firms, but also Adobe Sign is also a very popular one, and HelloSign we see as well from time to time.
Sophie Brookes: What I was going to say was, in order to sign via any platform, does the individual signatory have to have signed up with an account? Do they have to pay for it?
Joanna Belmonte: No. The person circulating the documents has to have an account. So for example, the law firm, if it's law farm organizing the signature, will have an account with the document platform. All the signatories will get a link that they click on, that enables them to sign the document, under the lawyers or whoever setting up the signing, can actually electronically track the documents as well, so it's really easy for the secretary to see exactly where they have to apply their signature. The platform will create an electronic signature for the individual to use. It doesn't have to look like your real signature. Personally, I'm not sure why, I like mine to look quite like my real signature, but it's not a legal requirement.
Sophie Brookes: Okay. It's quite simple for the signatory, the person receiving the document thereby its platform. But one thing that occurred to me is, right at the start we talked about all those different forms of electronic signature, it just typing your name into a document or cutting and pasting an image of your signature or writing with a stylus, all of those kinds of things. Given that there are all those alternative methods, which might be quite easy, why would you use a new signing platform rather than just say something like, somebody typing their name into a document?
Joanna Belmonte: Well, there are a few reasons for this, but mainly it boils down to the evidence and related to security and managing the risk. When people sign documents in wet ink, if it goes before a court and there's a debate about that signature, they might bring in a handwriting expert, for example, that's not going to work for electronic signatures. So we need to have more different ways of backing up the validity of our electronic signature. When you use a platform, the documents are encrypted and they can only be accessed by link sent to somebody's email address that they've given in advance. For added security, you can also use something called two-factor authentication. For example, that might be an access code sent separately to somebody's mobile phone number by text message. We're used to seeing that kind of thing with online banking, for example.
And using a platform allows you to add these extra security controls and be more confident than the person signing the document is the person who says they're signing a document, who's meant to be signing it. You also get a report as well from an online platform. It will say, who signed the document, at what time, and in what order too. And that can be useful too if you need an audit trail in the future.
Sophie Brookes: Okay. Another thing that occurred to me is, with the way that we're working at the moment, with documents all whizzing around electronically and people signing electronically, what actually counts as an original document now?
Joanna Belmonte: Yes, I think we'll begin to move away from the concept of original documents a little bit. It's the actual e-sign document, so there's no physical original, the original is the electronically signed document. However, it means that every copy of that electronic you print out can be a copy of the original, a true copy of the original document if you want a hard copy original. You don't often need them to be honest now, except for things like registries, companies house for example, or the land registry. If there is the odd scenario where you do need to wet ink original, then you might have to say in that document in wet ink.
Sophie Brookes: Okay. Brilliant. Thanks, Jo. That has been such a useful run-through of lots of common questions that I'm sure everybody has in this area. I just wondered whether, to finish off, what would be your top tips do you think for dealing with remote or electronic signings?
Joanna Belmonte: They almost all come down to planning, thinking ahead, mainly for the person who's going to be organizing the signing, but also if you're going to be asked to sign something electronically. I would say check that the other parties are going to be happy with electronic signatures. If there are banks involved, for example, or other large institutions, do they have their own rules that might prevent them from accepting electronic signatures on some documents. As we've mentioned for tech within the public registries, what's the position within land revenue? Are we sending anything to the land registry, for example? And make sure any of their requirements are followed.
If you can use an e-signing platform use one, because I've explained it gives you those additional security, and I think that might be helpful if you ever have to lead evidence about the validity of the signature. Make sure everyone understands what's happening actually because sometimes the person setting up their electronic signature will have done loads of deals and transactions using electronic signatures. The person signing might never have done a transaction through electronic signature before, so make sure they know what to expect. Have a chat beforehand, explain that they're going to get a text message with a code that they have to add in before they sign the document, for example, if you're using that kind of authentication.
The picky that confuses people is making sure that if there's going to be witnesses, that both the signatory and the witness understands they have to be in the same physical location. And sometimes just a bit for call or an email in advance of the signing, just explaining and making that really clear so it doesn't get lost in a list of longer instructions can be useful, and so they can plan. At the moment it can be quite hard to make sure you're in the same physical location as someone else. So gives them the chance to figure out who their witness is and how they're going to be in the same place at the same time can also be helpful.
Sophie Brookes: Brilliant. That's great, Jo. Thanks so much for those top tips and for answering lots of questions that I'm sure everybody had on those kind of remote and electronic signings.
Joanna Belmonte: You're very welcome. Thanks for asking me to chat with you.
Sophie Brookes: Thank you for listening to Talking Business. To find out more about the series, please visit gateleyplc.com/talkingbusiness. And there you can subscribe for updates, meet our speakers, and get more information on all of the topics being discussed.
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