Electronic signatures – increased usage during COVID “lockdown”

Electronic signature requirements

HM Land Registry has changed its stance and currently accepts electronic signatures, subject to certain requirements.

Pre-lockdown, virtual signings followed what became known as the “Mercury signing protocols”. These protocols emerged following the case of R (on the application of Mercury Tax Group and another) v HMRC [2008] EWHC 2721. Following the decision of this case, the Law Society of England and Wales developed a practice note on the execution of documents by virtual means (published on 16 February 2010) and developed a practice note on execution of a document using an electronic signature (issued on 21 July 2016). The objective of each practice note was to support solicitors and their clients “in delivering transactions in an evolving commercial environment, in a practical and pragmatic manner, but with legal certainty”.

Since the outbreak of the pandemic, the law in these areas remains unchanged and initially the usage of such practice notes increased significantly.

However, the Mercury signing protocols rely on a number of steps, some of which have proved impractical (but not impossible) in circumstances where many people are working from home.

A short summary of the Mercury signing protocol is as follows:

• Step 1 – Final agreed copies of the documents are emailed to each party by their solicitor
• Step 2 – Each party prints the signature page only
• Step 3 – Each party signs the signature page (if necessary, in the physical presence of a witness)
• Step 4 – (If necessary) the witness signs the signature page
• Step 5 – Each party sends a single email to their solicitor attaching the final agreed copy of the document and a copy of the signed signature page
• Step 6 – The transaction is completed

Many people do not have access to printing and scanning equipment at home and many organisations prohibit employees from printing out business related documents for security and confidentiality reasons.

An alternative to the Mercury signing protocol is digital signature and digital signing platforms, and these are becoming the recognised solution.

There are now a number of professionally recognised e-signing platforms (e.g. DocuSign and Adobe Sign) that are used numerous times every day to effect signatures on legal documents.

In many instances, the use of an e-signature is possible so long as certain requirements are met and consideration is given to issues (which are often similar) such as whether the person signing the documents has authority, and whether there are any cross-border implications.

Key considerations:

1. Does the contract or a statute that governs the document specify that the signature must be in a specified form? What jurisdiction governs the document? In England, the way in which this issue is overcome is two fold: (a) specify that the contract/lease is governed by the Laws of England and Wales; and (b) include a provision which states that the parties agree that an exchange/completion by electronic signatures/execution is valid and binding.
2. Is there a requirement for a wet ink signature to follow or for all the signatures to be in one document? If certain recognised platforms are used – e.g. DocuSign – then there is no requirement for a wet ink version.
3. When dealing with legal entities, does the company’s constitutional documents put any restrictions on the use of e-signatures and does the person signing have sufficient authority?
4. For an overseas (non-UK) legal entity, does the law of the place of its incorporation permit the use of e-signatures? Generally the non-UK entities need to execute the document in accordance with the law of the place of their incorporation and/or by a person authorised under that law and the company’s common seal may be needed.
5. Are there any requirements set by a regulatory, supervisory or other body relevant to the matter (for example, HM Land Registry)?

In our experience, we have found that the majority of property transactions that we undertake can be executed using an e-signing platform and we have welcomed the increase in such usage because it is expedient and secure.