Electronic Execution of Legal Documents by Local

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Senior Associate, Deborah Down, and Trainee Solicitor, Anna Sidebottom, outline the options for continuing to execute documents where offices are closed or working with a skeleton staff.

By law, all property transactions transferring an interest in land must be executed as a deed, while for contracts, a local authority’s Contract Standing Orders are likely to require that contracts over a set value must be executed by deed. In nearly all cases, local authorities execute deeds by affixing their seal and their general standing orders may prescribe how this has to be done. This article therefore focuses on their particular requirements, while also touching on the other contracting party on the basis that this is likely to be a limited company.

The emphasis of this note is that the contract or property document has been produced in its final version as a single, or set of, pdf files.

In preparing this article, reliance has been placed on Law Society guidance produced a few years ago about electronic execution, while more recently the Law Commission has also reviewed the law in this area.

FOR THE PUBLIC BODY

Scenario 1: Execution by signature (also known as under hand)

Where the document is for a property transaction not transferring an interest in land, such as a licence, or the local authority’s Contract Standing Orders permit the contract to be signed under hand, the process for electronic execution is set out below. This process needs to be adapted if two signatures are required for execution under hand (e.g. see sections 43 and 44 of the Companies Act 2006).

Scenario 2: Execution as a Deed by seal

Option a: If your office is open – see below for electronic execution using a seal (this involves printing a page if it is not possible to electronically apply a common seal).

Option b: If it is possible that a member of the Council’s staff can affix the seal from a remote location (e.g. at home) – see below for electronic execution using a seal (this involves printing a page if it is not possible to electronically apply a common seal).

Option c: If it is not possible to access or take the seal home, check whether your standing orders allow for execution by another method which can be done electronically, or whether a temporary waiver can be put into place to this effect. For example, is it possible for the Council to still execute as a deed by way of two signatures? This would then enable the process outlined below to be used. The Law Commission in 1998 recognised that there was no legal requirement in the Local Government Act 1972 for a local authority to use a seal, though it was customary to do so.

Note: Whilst the Electronic Communications Act 2000 introduced the recognition of electronic seals, and we are aware of software such as DocuSign which can facilitate this, local authorities should in any event consult their Constitutions as well as what software is available, to see if this is both practicable and permissible.

Option d: If standing orders cannot be amended/waived, and Options a. and b. are not available, then unfortunately there is currently no way for the document to be validly sealed. We are constantly monitoring government announcements which may address this – in particular see our article on local authority meetings which may help enable changes to standing orders.

FOR THE OTHER PARTY

Where the contractor is a limited company: see Companies Act 2006, ss 43 – 47 for general requirements

If not executing as a deed, sometimes only a signature from a single authorised signatory is required, and the process below for electronic execution can be followed.

Where a document has to be executed as a deed, or otherwise two signatures are required, then the process below is adapted for two signatories, with execution required by signature from:

  1. Two company directors or a director and the company secretary
  2. By a single director signing in the presence of a witness.

Current case law is unclear as to whether execution can be validly witnessed via video link. Parties are therefore advised, where a single signature is not sufficient, to execute through two directors (or one director and a secretary) rather than by a director and witness, to avoid this problem. They will need to execute the same page. The detailed process for electronic execution is set out below.

ELECTRONIC EXECUTION – deeds and documents not required to be executed as deeds

METHOD A: SIMULTANEOUS EXECUTION

  1. Before execution, the arrangements for virtual signing are circulated and agreed between all parties.
  2. When the document is finalised, soft copies for execution will be emailed (preferably in pdf) to all signatories and/or their lawyers, as agreed. A separate pdf (or Word) document containing only the signature page is also attached to the email.
  3. Each signatory executes the signature page only. The options for doing this are as follows:
    • Electronic signature – The Law Commission has confirmed that electronic signatures can be used for simple contracts and deeds. This includes pictures of signatures being placed in the document or a finger or stylus being used to draw a signature (see note below where two signatures are required).
    • Printing and signing/sealing the signature page only – This is the process which must be followed where a seal is required to be affixed, or where a “wet signature” is mandatory. If only printing the signature page, parties must ensure they return the whole document by email as well as an attachment with the signed/sealed page to ensure valid execution. (see also note below where two signatures are required). This may have to be adapted to meet Land Registry requirements.
  1. Each party then returns in a single email to its lawyers or the lawyers coordinating the signing (as agreed):
    • A scan of the signature page (if option b is used); and
    • The final version of the document (signed if option a is used) and every schedule.
  1. Note that under 4, a scan of the signed signature page alone will not suffice, the signatory MUST also attach the final version of the document and every schedule to the SAME EMAIL. This is in order to demonstrate the required intention to enter into that particular document. If the file size of the documents is too big for one email then multiple emails may be sent, but it must be made abundantly clear in each that every document is part of the same document (e.g. same subject matter plus ‘email 1 of 3’, ‘email 2 of 3’ etc.)
  2. A single composite pdf containing the document with the date of completion inserted on the front cover (either handwritten or “typed”), all the schedules, and all the executed signature pages is compiled by the coordinating lawyers. This is the point at which the document becomes legally binding.
  3. The composite pdf is then circulated electronically to the parties for their records; the composite pdf may need to be broken up into several parts in order to be small enough to email. Printed copies of the document can also be distributed should either party wish to hold a hard copy of the executed document once offices re-open.

IMPORTANT NOTES:

  • The same process above can be used for final documents and counterparts.
  • Where two signatories are executing a document, they will need to execute the same page e.g. one signatory prints, signs and scans the same page (and the complete document as above) to the second signatory who will print, sign and scan back to the solicitor (with the complete document as above).

2. METHOD B: SEQUENTIAL EXECUTION

As above, except that the page for signature and pdf of the entire document is first sent to the contractor/ first party with instructions to print and sign as above and return to the coordinating solicitors. Then the page signed by the contractor/first party is inserted into the composite pdf and sent to the local authority with similar instructions to print, seal/sign the page and return with the entire document. The coordinating lawyers will then collate the authority’s execution page into the electronic document and complete the document electronically.

A completed document can then be circulated to the parties by email as above and a hard copy provided if desired once offices re-open.

This article is for general awareness only and does not constitute legal or professional advice. Law and guidance relating to the COVID19 pandemic is continually being updated and the law may have changed since this page was first published. If you would like further advice and assistance in relation to any issues raised, please contact us today by telephone or email  covidhelp@sharpepritchard.co.uk.

Posted in Anna Sidebottom, Coronavirus (COVID-19), Deborah Down.