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Guidance note on electronic signatures

COVID-19 - Electronic Signatures in Ireland

 

The unprecedented circumstances surrounding COVID-19 has many of our members and affiliates working remotely and grappling with issues on a day-to-day basis to ensure continuity of business.  One such issue is the use of electronic signatures.

Electronic Signatures

 

Electronic signatures have been legally recognised in Ireland since the enactment of the Electronic Commerce Act 2000 (the “Act”), which implemented the Electronic Signatures Directive 1999/93/EC (the “Directive”). Regulation (EU) 910/2014 on Electronic Identification and Trust Services for Electronic Transactions in the Internal Market (“eIDAS Regulation”) replaced the Directive and has had direct effect throughout the EU since 1 July 2016, which means that in the event of conflict with national legislation, the provisions of the eIDAS Regulation will prevail. 

 

The eIDAS Regulation provides an EU-wide framework for Member States to recognise and accept electronic signatures, seals, electronic time stamps, electronic documents and electronic registered delivery services and certificates, among others. However, the eiDAS Regulation does not affect national or EU law related to the conclusion or validity of contracts or other legal or procedural obligations relating to their form. Therefore, we must still have regard to the Act to the extent that it does not conflict with the eIDAS Regulation (or any other aspect of EU law).

 

Section 9 of the Act provides that information shall not be denied legal effect, validity or enforceability solely on the grounds that it is wholly or partly in electronic form. Section 19 of the Act provides for an electronic contract not being denied legal effect, validity or enforceability on the grounds that it is wholly or partly in electronic form or has been concluded wholly or partly by way of an electronic communication. Article 25 of the eIDAS Regulation contains similar provisions with regard to the validity and legal effect of electronic signatures.

 

Section 13 of the Act sets out the key requirement of consent with regard to the use of electronic signatures in contracts. Each party to the contract must consent to the use of an electronic signature by the other party. The Act does not specify that the consent must be explicit, and therefore may be implied. However, it is best practice to obtain the express prior consent of all parties where possible. When dealing with public bodies, electronic signatures can only be used if the public body consents to their use and if the particular IT requirements of that public body have been met – provided those requirements have been made public and are objective, transparent, proportionate and non-discriminatory.

 

Execution of Documents Electronically

 

Certain documents (such as wills, trusts, enduring powers of attorney, affidavits, sworn declarations, interests in real property (including, for example, a deed of conveyance or an assignment of a leasehold interest in property) and documents required by the rules, practices or procedures of a court or tribunal) may not be executed using electronic signatures and must instead be executed in the traditional form of writing using a wet-ink signature.

 

Where a document is required to be notarised this would usually be in front of a Notary using a wet ink signature.

 

Electronic signatures are permitted for simple written contracts, provided the person to whom the signature is given consents to the use of an electronic signature.

 

Where a document is required to be signed by a witness (such as a deed to be executed by an individual), the witness should be physically present at the signing, and not rely on means of telecommunication (videocam, etc.) for the purposes of the witnessing. Otherwise, there is a risk that the deed may be deemed to have not been validly executed and therefore may result in the deed being constituted as invalid.   The witnessing requirement in respect of documents executed by an individual is met where either:

(a)     the witness is physically present when the signatory applies his e-signature, and the witness then applies his signature underneath as witness by his e-signature; or

(b)     the witness is physically present when the signatory applies his e-signature but does not have his own e-signature and therefore prints the e-signed documents and witnesses using a wet-ink signature.

 

Where a document requires a company seal, there is currently no electronic means for affixing a seal.   However, a company can grant a power of attorney (which does not need to be executed as a deed) granting authority to one or more individuals to execute documents including deeds on its behalf (an "Attorney").  This does not, however, negate the requirement to have the Attorney’s signature witnessed when he is executing deeds on behalf of the company.

 

The valid execution of documentation depends on a number of issues including, inter alia, the type of execution required (e.g. is the document a simple contract or a deed), legislative requirements, the jurisdiction under which the documents shall be governed in accordance with, the constitutional documents of the company and the powers of the individuals authorised to execute the documentation and internal governance procedures within an organisation, as appropriate.

 

Minutes & Resolutions in Writing

 

Subject to a company's constitution, minutes and resolutions can be signed using electronic signatures.  It is a matter for each organisation to determine whether wet-ink signatures should be applied to the originals for retention with the minute books of a company which are available for inspection by the ODCE and its directors and members.

 

Financial Statements

 

The Companies Act 2014 (s.324 (4)) provides that the signature or signatures evidencing approval of the financial statements by the board shall be inserted on the face of the balance sheet or group balance sheet.  Once a board of directors approves the Financial Statements and the board members consent to the use of their electronic signatures, this electronic version can be retained as the “original” copy of the Financial Statements and saved accordingly as such.

 

Practical Guidance

 

The following are some practical guidelines to follow when using an electronic signature:

         i.            obtain the consent of all parties to a document to the use of electronic signatures, including the individual who is applying their electronic signature to the document (prior express consent is preferable and this should be documented)

       ii.            ensure documents with electronic signatures are securely encrypted prior to circulation (with a password or by use of a digital transaction management platform)

      iii.            acknowledge safe receipt of legal documents duly executed electronically (to mitigate against cyber or fraud risks)

Detailed guidance on the use of E-Signature, Electronic Contracts and Certain Other Transactions is available from the Law Society of Ireland on the following link  

This article discusses the use of electronic signatures at a time when signatories may be required to sign documents remotely and is intended for Irish individuals and Irish companies executing documents governed by Irish law.  It is intended for guidance purposes only and does not constitute legal advice.  Professional legal advice should be sought depending on the circumstances of the documentation to be executed.

 

The Chartered Governance Institute - Ireland Region
May 2020