It doesn’t matter how fantastic the provisions you negotiate into your documents are: if you don’t get them signed correctly they will be of little value in practice.
The requirements for valid execution vary depending on the type of document in question. You may be contracting with any number of different entities and agreeing numerous different documents. It is important that all parties understand the signing requirements to ensure all agreements are binding and cannot later be challenged.
Some frequently asked questions:
Is there a requirement for a signature on a simple contract to be witnessed?
When you consider that many agreements can be made informally and do not even need to be in writing, it is not surprising that the execution formalities for simple contracts (as opposed to deeds) are not very onerous. Only the two parties entering into the agreement need to sign it and the signatures do not need to be witnessed.
Despite there being no legal requirement for a signature to be witnessed, it can prove helpful in evidence if a dispute arises about the validity of the agreement. However, the signature being witnessed will be of little help if a document has been signed fraudulently, as this could well mean that the signature has also been witnessed fraudulently.
Who can act as a witness to a signature?
When an individual executes a deed, their signature must be witnessed. A party to a deed cannot be a witness to another signature to that deed. Legislation does not prohibit a signatory’s spouse, co-habitee or civil partner from acting as a witness and it is also generally acceptable for an employee of a party to witness that party’s signature. However, it is best to ensure independent witnesses are sought to ensure unbiased evidence can be provided, if and when required.
There is also no prohibition against a minor acting as a witness but this can become problematic if the signature is challenged. You must at least ensure that the minor is of sufficient maturity for his or her evidence to be regarded as reliable.
Which documents have to be executed as a deed?
There are only a small number of documents that require execution by way of a deed. These include land transfers, leases, mortgages and charges, sales by a mortgagee, appointments of trustees, powers of attorney, gifts of tangible goods that are not accompanied by delivery, and releases and variations. Failure to follow the relevant statutory requirements can affect the legal validity of the agreement and/or the underlying transaction.
A deed may be used, even where it is not mandatory, when it is unclear whether valuable consideration has been given or if the parties wish to obtain the longer limitation period of 12 years that applies to claims brought under deeds.
Is there a requirement for a company to use a common seal?
All documents which previously required execution by affixing a company seal are no longer subject to that requirement and can now be executed by either two authorised signatories (a director and the company secretary or two directors) or a single director in the presence of a witness.
Companies can still use a common seal to execute documents, and many do – old habits die hard and some people like the formality and ceremony of the sealing process. However, executing a document using a common seal will not result in the document automatically being considered as a deed and, where relevant, the document must still be expressed to be a deed.
If a company seal has been used, who should sign the document?
This will be set out in the company’s articles of association. The Model Articles provide that this can be determined by the directors. If the directors do not do this, then one authorised person (a director, company secretary or any other person authorised to sign) can sign and this must be in the presence of a witness.
Can the same individual sign as a director and the secretary on behalf of a company?
No. The signatures of two authorised signatories are required and a single individual cannot sign in two different capacities.
Can two joint secretaries (rather than a director and the secretary) execute a document for a company?
An authorised signatory is every director and the secretary, which includes a joint secretary, of the company.
Each joint secretary would therefore be an authorised signatory and the signature of two of them would satisfy the requirements, so this would appear to be possible. This would only apply to joint secretaries who have equal authority to act.
Can the same signatories sign just once on behalf of a number of companies of which they are directors?
If a document is signed by a director (or secretary) of more than one company it must be signed separately by that individual in each capacity.
When a document requires the signature of two directors, can the directors sign separate counterparts of the same document?
There is currently no English law evidence or specific authority on whether each authorised signatory can sign counterparts of the same document. However, there is guidance that endorses the view that an execution clause requiring signature by two authorised signatories could be signed in counterpart. In particular, this approach appears to be recognised in the note on electronic execution published by the joint working party of The Law Society and The City of London Law Society which was confirmed in the Law Society's subsequent Q&As on how to use electronic signatures and complete virtual executions.
However, owing to the lack of actual legal authority, if it is possible for the two signatories to sign the same counterpart, it remains the preferred approach for many. If the two directors cannot be in the same location, consider having the document executed by one director in the presence of a witness instead.
Alternatively, the directors need not sign at the same time. If there is time, the same counterpart could be sent from one to the other for signing, before delivery or they could also each sign electronically – eg director one inserts their e-signature into the document, then forwards that document to director two, who adds their e-signature into the same document.
These are some of the more obscure questions relating to the execution of deeds and documents but they are commonly asked. They highlight the difficulties with a range of potential signing scenarios that could be encountered on a corporate transaction.