In recent weeks, businesses have needed to adapt quickly so that they can continue trading, with significant cost being incurred. The challenging commercial implications of COVID-19, with restrictions on physical meetings and the continuation of staff working remotely, is certain to continue for some time.
In the meantime, businesses should now take the opportunity to review how they intend to execute documents in such circumstances, and whether it is possible (and practical) to validly execute documents by electronic signature (e-signature), rather than by traditional wet-ink signature.
E-signatures are not a new concept, being recognised in Irish law since the Electronic Commerce Act in 2000. They can include:
- a simple e-signature (SES), which is data in electronic form that is associated with other electronic data and used for signing purposes, such as a typed signature;
- an advanced e-signature (AES), which digitally links the e-signature to the signatory; and
- a qualified e-signature (QES), which has the features of an AES but is created by a qualified electronic device and based on a qualified certificate for e-signature.
The benefit of an AES or QES over a SES is the capability to identify the signatory, while allowing the signatory to execute a document in a manner under their sole control, with any subsequent changes being detectable. Moreover, AES and QES provides greater security for parties in a transaction. A QES is predominantly used in highly regulated industries, and in high value transactions where greater reliability, security and resilience to fraud is essential.
Despite its clear benefits, to date there has been a slow uptake to e-signatures. It now seems likely that their use will have to become more prevalent. As e-signing platforms are based on cloud-based software and cyber-security is becoming more of a crucial issue for businesses, any party wishing to use them will need to satisfy themselves that the platforms used are sufficiently secure for their purposes.
When can you not use an e-signature?
E-signatures can be used in most circumstances. However, they cannot be used for executing certain documents, such as wills, trusts, enduring powers of attorney, affidavits and sworn declarations. Such documents must still be evidenced in the traditional forms of writing. While a contract for sale of land can be executed by way of e-signature, the deed of conveyance itself must be evidenced in the traditional form of writing.
As with any commercial decision, it is important to plan how a document should be executed, as the method of execution will depend on the circumstances. Businesses should consider whether the document is governed by Irish law, or the laws of another country which may not recognise the validity of an e-signature. A QES benefits from mutual recognition across all EU member states.
Other factors to consider are the provisions of any applicable legislation, and whether the constitutions of signing parties authorise the use of e-signatures. Furthermore, some public registries including the Companies Registration Office and Property Registration Authority require that certain filings be submitted as wet-ink originals.
Consideration should also be given as to whether the other party to a contract consents to the use of an e-signature. It is best practice to include a clause in the contract which provides that the e-signature has the same force and effect as a wet-ink signature. If the document is to be executed under seal, it should be noted that an electronic seal (e-seal) is available only to legal persons, such as corporate entities, and that an e-seal is not an e-signature of the legal person.
Certain types of documents (such as deeds) must be witnessed upon execution. The witness must be physically present with the signatory at the moment of signing. It is possible for the witness to use an e-signature, provided that the same formalities as in a handwritten signing are adhered to.
The Law Society of Ireland have published several Guidance Notes on e-signatures and virtual closings, most recently in March 2020. While there has been little appetite for such solutions in the past, current circumstances such as the lack of access to printers and scanners may result in an upward trend towards the use of e-signatures.
A key takeaway is that e-signatures have the same legal standing as a handwritten signature, subject to certain limitations and exceptions. While traditional methods of execution may still be available, an e-signature may be an effective solution for your business during COVID-19.
For more information, please contact us at firstname.lastname@example.org, or your usual contact at Vincent & Beatty LLP.