The Law Commission has published its final report on the validity of electronic signatures. The report confirms that electronic signatures can be used to execute documents as an alternative to wet ink signatures in most circumstances. There are some exceptions (such as stock transfer forms). The report only relates to the laws of England and Wales. Documents that are required to be registered at the Land Registry and wills are also outside of the scope of the report.
We have used electronic signatures on a number of transactions recently. It will be interesting to see whether the publication of this report leads to greater use of electronic signatures in Corporate deals and whether electronic signatures will be now accepted by banks and other financial institutions when conducting a Corporate deal.
In its report, the Law Commission sets out of a high-level statement of law in relation to execution using an electronic signature and concludes that existing legislation and case law is "sufficiently flexible to accommodate electronic signatures". The Law Commission confirms that an electronic signature is capable in law of being used to execute a document (including a deed) provided that the person signing the document intends to authenticate the document and any execution formalities are satisfied. An electronic signature is also admissible in evidence in legal proceedings. Currently our common law is flexible when it comes to recognising a legally valid signature accepting signing with an X, initials only, a printed name and even a description of the signatory such as "Your Loving Mother".
The Law Commission does not believe that further legislation on electronic signatures is necessary or desirable but does accept that a legislative statement may help to boost confidence in the use of electronic signatures as the law is not currently contained in a single source. The Law Commission provides an example of the form of this legislative statement.
The Law Commission has also concluded that the current law probably does not allow for "remote" witnessing. Current law that a deed must be signed "in the presence of a witness" requires the physical presence of that witness. This is the case even where both the person executing the deed and the witness are executing/attesting the document using an electronic signature. This remains an area of concern around the use of electronic signatures to execute deeds validly. It would be easy for a witness to overlook this legal requirement when signing via an electronic signature platform so witnesses should be properly briefed that they must be physically present and observe the signatory when they sign by applying an electronic signature.
The report includes some interesting recommendations including the creation of an industry working group to focus on practical issues and best practice and a review of video-witnessing for deeds. A future review of the law of deeds is also recommended to consider the effectiveness of deeds and whether they remain fit for purpose, as well as specific issues relating to witnessing, delivery and the Mercury Tax decision.
Further information can be found in this press release.