Charities are facing innumerable practical challenges during lockdown. With so many of us working from home and practising social distancing, one of those challenges is how charities can get documents validly executed. We set out below some of the common execution issues thrown up by the lockdown and some ways in which these can be managed, in particular through the use of electronic signatures.
We have considered these options in the context of charitable companies, however charities with different legal structures will of course have different execution requirements. Charities should consider their own execution formalities and how the use of electronic signatures may be adopted to meet these.
Electronic signatures generally
It is now commonly accepted that electronic signatures are valid under English law. An electronic signature can be applied in one of a number of different forms, not all of which are equally robust.
Ideally, an electronic signature would be applied to a document using an e-signing platform, such as DocuSign. These platforms commonly use authentication mechanisms to guard against fraudulent execution. If an e-signing platform is not available to you, then using a stylus to sign the document on a touch screen device or importing an image of your signature into the document are the next best options. The least robust means of signing electronically is by simple typing your name onto the document, as such a method is clearly open to fraudulent abuse.
As long as the signatory intends to be bound by the electronic signature, then it will be valid so long as any other applicable formal requirements for the execution are met.
Any use of electronic signatures should be discussed with the counterparties before signing to ensure all parties are in agreement.
Generally, the position in relation to contracts will not be problematic.
A charitable company can enter into a contract through any duly authorised signatory (who is likely to be one of the trustees). It is important to make sure that the trustee signatory has been granted the authority to bind the charity, either through its articles of association or a board resolution.
A trustee may therefore, with the appropriate authorisation, simply sign the contract on behalf of the charity using an electronic signature.
If an electronic signature is not available, the signatory may instead simply print off a copy of the contract and sign and date it by hand. If a counterparts clause has been included, it will not be necessary to circulate this hard copy to other signatories (see more on counterparts below).
The execution formalities for deeds are more stringent than those for contracts. Deeds are used for particular types of transaction, such as transfers of land, and when there is any doubt about whether 'consideration' (which might be thought of loosely as 'value') is being transferred from one party to another.
Generally, a charitable company can execute a deed through:
- two trustees;
- a trustee in the presence of a witness; or
- a trustee and a company secretary.
It is common for charitable companies to execute deeds by the trustees affixing the company's common seal, while following any additional requirements set out in the articles (which generally require the signature of one or more trustees to accompany the seal). There is no reliable authority for the validity of affixing a company seal electronically.
In the circumstances, it is possible that two trustees, or trustee and secretary, executing the document electronically will be most practical, unless it is possible for one trustee to have the document witnessed.
When the execution of a document calls for a witness, that witness must be physically present at the signing of the document. As a result, witnesses cannot attest a signature via a video call or similar medium.
However, this does not mean that an electronic signature of a witness is invalid. Witnesses can sign electronically as long as they are present to witness the signatory's signing of the document.
It may be possible, depending on the circumstances, for witnesses to maintain social distancing practices while witnessing the signing of a document. For example, a witness could stand in an adjoining room with the signatory in his or her line of sight before signing the document with a different pen. Another common technique is for a signatory to sign a document on a car bonnet with a neighbour witnessing from a nearby window. As a last resort, signatories could rely on the fact that a witness does not actually need to sign at the same time as the signatory, but can do so later. Whichever route is taken, it is important to keep a contemporaneous record of what happened in case of a later challenge.
While it is not strictly necessary for witnesses to be independent, as a matter of good practice it is better that they are so (in case of the need for unbiased evidence of the execution to be provided at a later date).
It is worth adding a final word on counterparts.
If electronic signing is not possible, it should be remembered that it is not necessary for all parties to a deed or contract to sign the same physical document. If a counterparts clause is included (which simply states that the document can be executed in counterparts), then it is only necessary for each party to sign and date its own copy of the document.
The obvious advantage of this is that physical documents do not need to be circulated by post between two or more parties. Remember to keep your original counterpart in a safe place until we return to normal working practices.
If you are having any issues executing documents on behalf of your charity, or you have concerns about the validity of electronic signatures (particularly where there are cross-border considerations), then please get in touch with Chris Priestley or your usual Withers contact.