Electronic signing of documents

Stephen Pearson, Freeths, Nottingham

Electronic Identification and Signature Regulation 910/2014 (the  “eIDAS Regulation”) established an EU wide legal framework for electronic signatures and is directly effective in the UK from 1 July 2016. Article 25 of the eIDAS Regulation provides that an electronic signature shall be admissible as evidence in legal proceedings. Electronic signature encompasses a range of execution methods, including:

  • an “advanced electronic signature”, including using a web-based platform to apply a signature to a document;
  •  a “qualified electronic signature”, based on a formal qualified certificate for electronic signatures; and
  • a “simple electronic signature”, including typing a name into an electronic form of a document or electronically pasting a signature (in the form of an image) into a soft copy version of a contract in the appropriate place.
  • We expect advanced electronic signatures will be the most common type of electronic signature, as qualified electronic signatures are not frequently used in the UK. Simple electronic signatures will not generally be acceptable in substantial commercial transactions, because they are very difficult to verify (there is no way of knowing who inserted the signature, or when) and thus susceptible to fraud. An “advanced electronic signature” is defined in eIDAS as: uniquely linked to the signatory; capable of identifying the signatory; created using electronic signature creation data that the signatory can, with a high level of confidence, use under his sole control; and is linked to the data signed in such a way that any subsequent change in the data is detectable. Advanced electronic signatures require a third party platform, where the signatories sign documents by accessing the platform from an email link, completing authentication (user ID and password/PIN or fingerprint scan) and digitally signing a pre-uploaded document. The third party platform prevents changes from being made to the document once it has been uploaded for signing. It also captures information about the signature (time, place, IP address) that can be used to authenticate the signature. The Law Society has recently published a practice note on the execution of document using electronic signature, which has been approved by leading counsel. The note sets out principles for determining whether certain types of contracts, as well as minutes and resolutions, that have been signed with an electronic signature have been validly executed. In general the guidance supports the validity of electronic signatures for both simple contracts and deeds.

However, we do see some practical issues:

  • The usual formalities that apply to paper documents will apply equally to documents signed electronically so a company will still need to execute by two authorised signatories or one director in the presence of a witness. It is considered that both authorised signatories would have to sign the same electronic document which complicates this approach in practice. Additional problems arise with attestation, since the witness is attesting to the fact that he or she saw a particular individual applying the signature;
  •  Signing arrangements will need to address when delivery takes place, particularly if parties propose that their lawyers hold signed documents to the order of the relevant party prior to the deed coming into effect;
  • There are some UK registries that do not currently accept electronic signatures on documents submitted for registration.   This includes the Land Registry,  the Land Charges Registry, and HMRC (for stamp duty purposes). Such documents will still need to be signed using wet-ink signatures for the time being. However, it is possible that over the next few years these registries will change their practices. For example, Companies House already accepts electronically signed documents and the Land Registry has announced plans to launch an electronic mortgage service.
  • We envisage that the number of parties using electronic signatures for legal documents will increase, but perhaps slowly while organisations investigate the systems and process required to be put in place.

For further information please contact Stephen Pearson on 0845 274 6900