20: Electronic execution of pension deeds
In this blog we consider the electronic execution and delivery of deeds. Alternatives to a wet ink signature have been brought into focus during the COVID-19 lockdown as companies and individual trustees explore ways to sign pension documents electronically. This note does not deal with the electronic execution of other pension documents such as contracts or funding statements and nor does it deal with non-pension documents, where different provisions may apply.
The Law Commission concluded in its 2019 report on the electronic execution of documents that an electronic signature is capable of being used to validly execute a deed as long as the person signing the document intends to authenticate it and applicable formalities relating to the execution of the deed are satisfied. However, the requirement for a witness to attest signature imposes practical limitations on the ability of individuals to execute a deed electronically.
What is an electronic signature?
The statutory definition of an electronic signature is broad and requires only that one set of data be attached to another set of data by a person with the intention of signature. This could include (but is not limited to):
- typing your name or initials at the bottom of an electronic document, such as an email, or in the signature block of a Word document;
- a scanned handwritten signature that is incorporated into an electronic document, or pasting an image of a manuscript signature into an electronic document;
- clicking an ‘I accept’ or ‘I agree’ button on a website;
- using a stylus or finger to sign an electronic document via a touchscreen or digital pad; and
- using a web-based e-signing platform such as Adobe Sign or DocuSign to generate an electronic representation of a handwritten signature or a digital signature which is backed by a digital certificate from the platform (sometimes referred to as digital signatures).
The requirement for a witness to attest signature of a deed
Where an individual signs a deed (either on their own behalf or on behalf of a company or LLP), their signature must be attested by a witness. This causes an issue when it comes to electronic signature of a deed, because it is the Law Commissions’ view that a witness is likely to need to be physically present and in the same location as a signatory when they are required to attest their signature.
Witnessing a signature by watching via video link is not likely to satisfy the requirement. Equally, using a signing platform where the signatory and witness log in from different locations without a video link and each create a digital signature may well cast doubt on the validity of execution.
What does this mean for individuals and companies executing a deed?
In view of the requirements for a witness to be physically present to attest a signature when an individual signs a deed (either in their capacity as an individual trustee or as sole signatory on behalf of a company) it is likely to be necessary to execute by wet ink signature. An electronic (pdf) copy can then be scanned and sent (but see below for dating and delivering the deed).
Normally, the witness should not be a family member to avoid concerns around independence but using a family member will not invalidate the execution of the deed.
Companies and LLPs
A company can validly execute a deed by:
- affixing its common seal; or in the case of a Company or LLP;
- by two authorised signatories (ie two directors or a director and secretary or two members); or
- by the signature of one director / member in the presence of a witness who attests the signature.
There is therefore more latitude for a company or LLP to electronically sign a deed through two authorised signatories because this avoids the requirement for a witness.
Further the 2019 Law Commission report confirms that where a deed is executed by two authorised signatories, there is no requirement for the signatures to be applied at the same time. They can sign the deed electronically either in counterpart, or on the same soft copy of the deed.
Dating the deed
In order for a deed to be effective it must be delivered, which means there is evidence of the intention of the signatories to be bound by the deed. For a company and LLP, signing of the deed is evidence of the intention to be bound by the deed unless the contrary is proven.
Often the terms of a pension deed will state that it is delivered with effect from the date written on the deed. This will override the presumption of delivery for a company and LLP and mean that the deed is not effective until dated.
It is possible for solicitors to date electronically signed deeds on behalf of their clients when instructed to do so but in order to do that the Law Society in its 2010 guidance following the Mercury tax case, sets out specific requirements that must be met: the signing parties should return a pdf of the signature page with a copy of the whole deed in the same email, together with instructions to the relevant party about the authority and timing of dating the document.
The Law Society guidance also recommends that the solicitors advising the parties to the deed should agree the process before the deed is issued for electronic execution.
Check the provisions in governing documents and applicable statutory requirements
While scheme rules and statute are unlikely to specify the method by which a deed must be executed, pension scheme stakeholders should check that a deed, however executed, will satisfy the relevant requirements of the rules and statute.
Given the risk that a deed (or indeed any document) may be invalid where the appropriate process is not properly followed, we recommend that you contact your solicitor and seek guidance before electronically executing a deed.