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Going online to sign - an eSignature Guide

Richard-Edmundson-managing-partner Richard Edmundson
Managing Partner, Global International Business Reorganisations Leader, ILC Legal, LLP, United States

The use of e-signatures was already growing exponentially before COVID-19 forced so many directors and officers to work from home. That is not surprising given that e-signatures are efficient, secure and now acceptable for the execution of legal documents in the majority of jurisdictions, and are even admissible in courts in certain jurisdictions. The pandemic, however, has led to more businesses and individuals going online to sign.

Today only a handful of countries don’t recognise any form of e-signatures, though there are still a number of instances where their use will not be appropriate. There are also various different types of e-signature standards, which may determine where and when they can be used. 

That’s why it's so important when completing any international reorganisation project that may cross borders and have complex legal requirements, that you identify the circumstances where it is appropriate to use e-signature. This will avoid the risk of invalidating proposed transactions or delays if ‘wet ink’ signatures are required.

Not accepted here

Given the changes in laws due to COVID-19, the e-signature landscape can be something of a moving target, but here are some examples where e-signatures may have limitations:

Different laws covering different entities: While the governing law of a contract may provide for execution by e-signature, an overseas signatory may not be permitted to use e-signatures as a result of a prohibition in its constitutional documents or the requirement to affix a company seal. This is the case for many companies in Nigeria.

Registering contracts: Where a contract must be registered, the local position should be confirmed as certain local authorities do not accept e-signed documents. For example, a number of government related filings in China must be made using documents with wet-ink signatures.

Document types: In some jurisdictions there are particular categories of documents where e-signing is not permissible. For example, documents relating to the transfer of real property in Barbados or documents relating to intellectual property transfers in South Africa.

Witnessing: There is also a debate on whether documents that require witnessing can be signed electronically. Although in theory this might be permitted, witnessing electronic documents does raise some practical concerns and is often not recommended.

Notarisation: In various jurisdictions, there is still a requirement to have documents signed in front of a notary and very often affixed with an apostille. Where this requirement applies, e-signatures will most likely not be accepted. Notaries have become more flexible, commercial and accommodating during the COVID-19 pandemic but whether these practices will continue once normal service resumes is unclear.

Different standards

The phrase “electronic signature” is widely used, but it’s worth noting that there are various forms of e-signatures and choosing which one to use is important, depending on the type of document to be signed. The most common forms of electronic signatures are:

  • SES: Standard Electronic Signature, which is an electronic form of a signature that a signer applies to a document as evidence of their intent to sign.
  • QES: Qualified Electronic Signature, provides additional substantiation in court by providing the digital equivalent of a handwritten signature. It is a specific digital signature implementation that has met the particular specifications of a government, including using a secure signature creation device and been certified as ‘qualified’ by either that government or a party contracted by that government.
  • AES: Advanced Electronic Signature is a type of electronic signature that meets the following requirements: (a) it is uniquely linked to the signatory; (b) it is capable of identifying the signatory; (c) it is created using means that are under the signatory’s sole control; and (d) it is linked to other electronic data in such a way that any alteration to the said data can be detected.

Although we mainly come across standard electronic signatures, there will be occasions where the most advanced types of electronic signatures are required. For example in Argentina, the requirement for signing electronic agreements is that they are executed using a QES.

Future proof

E-signatures have proven essential during the pandemic lockdowns. It is possible that the temporary rules introduced by various governmental bodies regarding e-signatures acceptance, may now become permanent measures. For example, the UK tax authorities are currently accepting e-signed documents for the purposes of processing stamp duty relief applications. In Austria if a notarial form is required, e-signatures have now also been permitted.

Looking ahead, it’s clear e-signatures can improve the efficiency, accuracy and governance of legal transactions. Their use is likely to increase and they will become more sophisticated as the technology evolves. Businesses need to be clear where, when and how they can and should be used.

We work closely with our clients to plan the use of e-signatures on large or complex international business reorganisation projects. On top of this, we can perform an assessment of the key documents in your organisation, to ensure that e-signing of such documents is compliant with local laws. The impact of getting this right can be considerable.