E-signatures – the way forward in M&A transactions?

10 October, 2018

Copyright : pratyaksa

E-signatures can be used to sign formal legal contracts under English law, the Law Commission has confirmed.

In its recently published consultation paper, the Law Commission has attempted to overcome uncertainty in the law and has confirmed that deeds and other documents that are executed electronically will be valid under English law.

The Law Commission is the independent statutory body created to keep the law under review and to recommend reform where it is needed. Its opinions are not legally binding, but do hold considerable weight and its proposals are usually adopted by the Government.

The Commission opened a consultation on whether a new law is required to reinforce the validity of e-signatures and has concluded that at present no further primary legislation is necessary. However, it stressed that its proposals are provisional and will be finalised following public consultation.

What does this mean for M&A?

The current practice surrounding completions favours a wet-ink signature with completion taking place either in person or via an exchange of scanned signed documents, both of which can cause practical difficulties, which can result in unnecessary delay in completing.

In an era where businesses are increasingly moving towards fully digital signing interactions with customers and suppliers, it seems that the legal world is lagging behind.

A digital completion would mean an e-signature platform could manage the signing stage. Parties could access the documents via the web based platform and then sign the documents with a few keystrokes or taps on a touch screen from anywhere in the world using a computer, tablet or smartphone with an internet connection, thus removing the necessity for printing, signing and scanning.

The Commission went as far to suggest that, where a signing requires witnesses, such as for some deeds, this could be done via webcam or video link, which is not currently permissible by law.

The Commission’s opinion confirms most practitioners’ understanding of the position, and it is useful to hear its guidance. Due to the outstanding issues with witnessing deeds, wet-ink signatures will still be needed for most transactions and this won’t change until the law on deeds is reformed.

Other stages of the M&A transaction have benefited hugely from advances in technology, first with online data rooms and more recently using artificial intelligence to assist in contract review at due diligence stage. Despite the outstanding issues, could the use of electronic signatures at the completion stage bring us a step closer to the fully digital M&A transaction of the future?

The Commission’s consultation ends on 23 November 2018.

A link to the full consultations is below: