Remote document execution during Covid-19
TECHNOLOGY, INNOVATION, LAW AND TAX
We examine below practical considerations for arranging remote execution of transaction documents by Irish companies during the present Covid-19 restrictions. Ideally, where a document needs to be signed, it would be in the physical presence of all parties or their appointed attorneys at the completion of a transaction. With present travel restrictions lasting into the summer and many signatories working remotely without access to printers or company seals, this will not be practicable for many transactions. Alternative approaches to execution will have to be explored.
This Insight will examine the options available to a signatory of a document in the following circumstances:
The scope of this Insight does not encompass specific execution formalities such as corporate authorisation requirements, contractual provisions or regulatory and tax considerations for the execution of a document by an Irish company. Other relevant factors which should be considered before arranging for electronic signature include the governing law of the document, the constitution of the relevant Irish company, as well as the requirements of any relevant registry or State department (such as the Department of Foreign Affairs) for wet-ink originals.
1. The signatory can access a printer
The Law Society has identified three possible approaches to the ‘virtual’ exchange of wet-ink executed documents. The first method for ‘virtual’ exchange may be used for all documents, including deeds. Where the agreement is to take effect as a simple contract, and not a deed, the Law Society guidance provides that the second and third methods of ‘virtual’ exchange may be used. These two methods (b. and c.) for ‘virtual’ exchange may not be used for deeds.
a. Return entire final, agreed form document
The simplest ‘virtual’ exchange is when the signatory returns the entire PDF/Word final, agreed form document with the executed signature page included. This will suffice for the exchange of any type of document. Returning the compiled, executed document also removes the additional requirement for express authority to attach the signed page to the final document.
Where the document to be exchanged is a deed, instead of returning an electronic copy of the entire executed document, the signatory may return the signature page(s) along with the entire execution version of the deed as attachments to the same email, confirm that the former may be appended to the latter and give instructions as to when the document is to be delivered.The Law Society has prepared template authorisation language in this regard. This method of execution can be useful where the execution version of a document is especially long, so that it may not be practical to print it in its entirety. We consider the execution requirements of a deed further in paragraph 3 (The document is a deed).
b. Return signature page only for final, agreed form documents
For a final, agreed form document to be executed as a simple contract, a similar process to that set out for deeds above may be applied, save that only the signature page need be returned with authority for it to be attached to the final version of the document. The degree of formality required for this authority will vary with the circumstances.
c. Return signature page only before the document is in final, agreed form
Before the agreement is in final, agreed form, the signatory may sign and return a signature page with an instruction for it to be held to the order of the signatory (or of their solicitors) pending authority being given for it to be appended to the final, agreed form.When the agreement is in final, agreed form, it is shared by email with all signatories and their solicitors. Each signatory then confirms by return that;
i. the agreement is in final, agreed form;
ii. that his or her pre-signed page may be appended to that version; and
iii. that the document may be dated.
2. The signatory can access electronic signatures
a. Irish and EU Law
An electronic signature is a method of signing a document other than by wet-ink. Electronic signatures have a statutory footing in Ireland under the Electronic Commerce Act, 2000 (the “E-Commerce Act”). The E-Commerce Act provides that an electronic signature shall not be denied legal effect, validity or enforceability on the grounds that it is electronic.
From the outset, signatories choosing this method should be aware that it is a pre-requisite to the use of electronic signatures under the E-Commerce Act that all parties consent to the use of electronic signatures. Signatories availing of electronic signatures should ensure they are satisfied the signature type they are using is appropriate for the document being executed.
The E-Commerce Act provides for two types of electronic signature. These are described in broad terms below;
i. Electronic signatures are defined as data in electronic form attached to, incorporated in, or logically associated with other electronic data and which serves as a method of authenticating the purported originator, and includes an advanced electronic signature. The E-Commerce Act does not provide specific examples of what will and will not qualify as a “simple” electronic signature. However, it is likely that the standard is not onerous. It may be that the act of typing one’s name into a signature line may suffice as an electronic signature. However, consistent with the formality which should attend the execution of physical contracts which are intended to be legally binding, where a contract is to be signed electronically, it is better that a professional provider of electronic signature services be used. A photo or scan of a wet-ink signature page is not an electronic signature; and
ii. advanced electronic signatures have strict requirements such as being uniquely linked to the signatory. A number of provisions of the E-Commerce Act provide for the use an advanced electronic signature based on a qualifying certificate. Advanced electronic signatures can be used where a signature is to be witnessed or for documents under seal. This is a complex method of executing documents. The complexities of an advanced electronic signature are compounded by the requirements for the issuance of a “qualified certificate” and a certification service provider. It is not a common method for the execution of documents in Ireland.
The validity of electronic signatures is also recognised as a matter of EU law. Regulations have also been introduced at EU level to govern electronic signatures in the form of Regulation (EU) No 910/214 On Electronic Identification and Trust Services for Electronic Transactions in the Internal Market (the “eIDAS Regulations”). The eIDAS Regulations provide a common transactional foundation for secure electronic interaction between European citizens and allow for an electronic signature which is valid in one Member State to be considered valid in another. The eIDAS Regulation distinguishes between three levels of electronic signature:
i. Electronic signatures are an electronic form of signature, such as typing or writing with a stylus which can be affixed to a document as evidence of the signatory’s acceptance;
ii. Advanced electronic signatures must comply with certain requirements and must be uniquely linked to, and capable of identifying the signatory. In practice, an example of this would require the signatory to enter a pin to affix their signature; and
iii. Qualified electronic signatures are a specific type of electronic signature that must meet the requirements of an advanced electronic signature but with the addition of being created by a ‘qualified electronic creation device’ and based on a ‘qualified certificate’ for electronic signatures.
b. Electronic signature use which is without prejudice to existing legislation
Under the E-Commerce Act, an electronic signature shall not be denied legal effect, validity or enforceability on the grounds that it is electronic. There are however exceptions to this general rule. An electronic signature may not be used to execute any of the following:
i. a trust, or an enduring power of attorney
ii. statutory/sworn declarations and affidavits;
iii. wills and codicils; or
iv. any document which creates, acquires, disposes of, or registers an interest in real property.
The E-Commerce Act is also without prejudice to court rules, practices or procedures. Provision is made for the extension of the E-Commerce Act to these areas over time by Ministerial regulation.
While a document which creates, acquires or disposes of an interest in real property cannot be executed by electronic signature, a contract for the creation, acquisition or disposal of such interests may not be executed electronically. This suggests that while a deed to convey property may not be executed, a contract for sale may be so executed.
3. The document is a deed
The formalities for the execution of a deed are set out in Section 64(2) of the Land & Conveyancing Law Reform Act 2009. In the case of an individual, his or her signature to the deed, will have to be witnessed. In the case of an Irish registered company, it must be executed under the company’s seal. These formalities may pose a challenge in the present circumstances. When confronted with arranging for the execution of a deed, consider the following:
a. Must the document be signed as a deed
Consider whether the document can be signed as a simple contract.Certain categories of agreement must be executed as a deed in order to be legally binding.These include agreements in respect of which sufficient consideration does not pass and those relating to certain transactions relating to land and interests in land.If the agreement at issue does not fall into any of these categories, consider recasting it as a simple contract to avoid the execution issues presented by deeds.
b. If it must be a deed, how will the deed be sealed
As noted above, to execute a document as a deed, an Irish registered company must do so under seal.
i. If the seal is accessible
It is advisable to check in advance that the seal is accessible at present and functioning correctly. The building housing the seal may be locked, have restricted access or be located outside the permitted travel radius. If the seal is accessible;
a. Review the constitutional signing requirements
The company should review the constitution to verify the requirements for the use of the seal and for the signature and countersignature the seal. The default position under Section 43 of the Companies Act, 2014 (the “Companies Act”) is that the seal may only be used with the approval of the board of directors. Consequently, before the seal is used, it will be necessary to pass a resolution of the board authorising same. For guidance on the passing of board resolutions in the current circumstances see our Insight on Corporate Governance: Holding board meetings in a time of social distance here. If two directors must be physically present when the seal is affixed, consider Government social distancing requirements and travel restrictions before meeting.
b. Review who is authorised to sign and countersign the affixation of the seal
Section 43 of the Companies Act contains default rules as to the persons who may sign and countersign the seal. This section permits the board to authorise persons who are not officers of the company to sign and countersign the affixing of the seal. Before relying on this provision, the company should review its constitution to see if Section 43 has been dis-applied or altered. Particular care should be taken by companies which have a deemed constitution pursuant to Section 61 of the Companies Act (by reason of not having adopted a Companies Act compatible constitution after its commencement). The constitution of such a company may still incorporate Model Regulation 115 of the Companies Act, 1963 which provided for a more restrictive regime for the signing and countersigning of the affixation of the seal.
ii. If the seal is not accessible
Failing the availability of the seal, the following considerations may assist.
a. Power of attorney
The company may grant a power of attorney to one or more individuals to execute the deed on the company’s behalf. Where a duly appointed attorney executes the deed on behalf of the company, the document will bind the company as a deed in the same way as if its seal were affixed thereto (Section 41(2) of the Companies Act). In an important change to the law brought about by the Companies Act, the instrument appointing the attorney need not itself be under seal. The attorney will itself need to comply with the formalities for the execution of a deed. So, for instance, if the attorney is an individual, their signature in their capacity of attorney will have to be witnessed. This is a more flexible option if there are logistical difficulties with procuring company seals or director signatures. The appointment of an attorney must be authorised by the board of directors of the company.
b. Duplicate seals
Timing permitting, arrange for a duplicate seal to be made and couriered to the location where it can be affixed in accordance with the provisions of the constitution of the company. Duplicate seals are facilitated under Section 43(1) of the Companies Act.
c. Electronic signatures and seals
Section 16 of the E-Commerce Act allows for the use of electronic signatures where a document is required to be executed under seal. The signature must be an advanced electronic signature based on a qualified certificate. As noted above, in our experience, this method of execution is not being used by Irish companies.
d. Amend requirements of constitution
As a final resort, if none of the above options are feasible, it may be possible to vary the requirement for the seal to be countersigned by an amendment to the constitution to allow for the seal to be signed by, for example, one director.
e. Other considerations
Consideration should also be given to the language of the signature block. For example, does it require the persons signing and countersigning the affixation of the seal to be present when the seal is affixed, and if so, this must be respected. Where the signature block does not require such persons to be “present”, consider;
affixing the seal to the document;
posting it to the signatory for signature; and
have that person post it to the counter-signatory for countersignature.
When affixing the seal, consideration should also be given to how the other party will view the seal. If the signature page is being scanned, the seal must be visible, or an assurance given that the seal has been affixed correctly. Usually a coloured sticker is placed beneath the seal making the seal visible and legible on a scan.
4. The signature requires a witness
There is a view that the requirement that a document be executed in the presence of a witness will not be satisfied, unless the witness is physically present. The Law Society advises that best practice is for a signature not to be witnessed by means of telecommunication.
Where a document is executed by electronic signature, a witness to an electronic signature should be physically present when the signatory affixes the electronic signature and either affix their own electronic signature or print the signatory’s electronic signature and sign the signature page.
While it is generally preferable that the witness be independent of the signatory, this is not a statutory requirement. In the extreme circumstances in which we find ourselves, there may be no option but for a member of the signatory’s household to act as a witness. Signatories should be aware however that a party to a deed cannot witness the signature of another party to that deed.
The E-Commerce Act provides that advanced electronic signatures based on a qualified certificate may be used for the execution of documents which need to be witnessed.
5. The document requires legalisation
Requirements around notarisation, legalisation and submission to the Department of Foreign Affairs are undoubtedly more complicated given Covid-19 pandemic restrictions. It is advisable that delays are factored into any legalisation requirements from the outset of the transaction.
A notary will still require the physical presence of the individual whose signature the notary is attesting. Any meeting will need to be conducted in accordance with public health requirements and guidelines.
The Department of Foreign Affairs remains able to process documents submitted by post to their Dublin office but their public offices in Cork and Dublin are closed.
6. The document is to be submitted to the CRO
With two exceptions, the CRO continue to require wet-ink signatures to follow electronic form submissions;
Forms which must be filed online (e.g. C1, B1, B10, B2) may be signed electronically using a ROS certificate.
As an interim measure, the CRO is accepting the filing of summary approval procedure documents by email. Details of this process are set out in our previous insight - Difficulties Facing Banking Practitioners as a Result of Covid-19.
For more information on the content of this insight please contact:
Aidan Burke, Solicitor | E. email@example.com | T. +353 21 4802700
Sean O’ Reilly, Partner | E. firstname.lastname@example.org | T. +353 21 2332822
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