Three things you need to know about using e-signatures in the Digital Age27 Oct 2017
The Digital Age is well and truly upon us. Most of us now couldn’t live without our smartphones, tablets, Smart TVs, laptops and the like. Therefore, understandably, we are often asked by our clients whether it is safe and acceptable to digitally sign documents.
The short answer is yes. Regulations allowing digital signatures (The Electronic Identification Regulations) have been in force since 1 July 2016. This means that, where English law imposes a statutory requirement for a contract to be in writing or signed, this requirement can be met with an electronic signature. However, we do find that there is uncertainty as to their appropriateness in all circumstances.
There are different types of digital signature, from relatively simple types, like those generated with a stylus or mouse, or a name at the bottom of an email signature, to more sophisticated forms such as fingerprint signatures or digital authentication used via verified software programmes, like those used for online banking or shopping. At present, we find the simple types to be those commonly used by SMEs.
There are some practical matters to watch out for and consider when using digital signatures:
One: Rules for special documents
One requirement for a deed is that it must be witnessed; and we have good news – where a person witnesses someone applying their e-signature to the deed, this is sufficient. In fact, the witness can apply an e-signature too. Please note that it is best practice for the witness to be in the same room to physically see the e-signature being applied, not via electronic means such as a video call.
However, some bodies like the HMRC and Land Registry will not yet accept certain documents signed electronically; documents that need to be stamped by HMRC or lodged for registration at the Land Registry must still be signed in wet ink, the old-fashioned way.
If a document needs to be legalised/notarised, either for use in the UK or abroad, careful consideration with your legal advisers will be required before using a digital signature, as it could prevent the necessary legalisation/notarisation.
Some of our clients do business outside of England and Wales and it is important to bear in mind that there may be requirements in other countries whereby documents need to be signed in wet ink to be valid if they are subject to the laws of, or have a party to it from, another country.
The main potential area of risk with using e-signatures is that there could be some later challenge to its authenticity, i.e. the person whose e-signature it was did not authorise the use of it. This may lead to the validity of the document and the enforceability of the legal obligations pursuant to it being challenged.
Whilst some businesses are reluctant to e-sign documents due to the risk of fraud, it’s now generally accepted that the more sophisticated the security relating to the application of the e-signature, the more certainty there is that the person ‘signing’ it is who they say they are. A good idea is to use one of the available secure platforms: portals or email addresses with a secure password that tracks and records who has accessed the platform and applied their signature.
Whilst we all know that passwords and emails can be hacked or used without permission, an English court would accept a document signed by electronic means as prima facie evidence of authenticity, unless evidence to the contrary was presented.
Someone seeking to assert that a signature was not authentic, or applied without authority, would have to prove it on the balance of probabilities.
Equally, the risk of fraud remains with wet ink signatures too.
There are steps you can take as part of a legal process to check whether someone has the relevant authority, such as seeing board minutes or other authorisations of the various parties, evidencing that a particular person has been given express authority to sign.
For now, the more simple styles of electronic signature are used most commonly in UK business transactions. The decreasing use of paper and increasing reliance on digital technology leads us to predict that it will soon become commonplace. Eventually, we hope, concluding a transaction will become much quicker and easier as the prevalence of e-signatures increases and processes for ensuring the security of e-signatures become more widely used and accepted.
For further information on the use of electronic signatures, please contact Helen Mather, Associate, Corporate at Kuits on 0161 832 3434.