Corporate and commercial round-up July 2020
Impact of COVID-19 on executing documents remotely
The coronavirus pandemic has changed the way most of us work, with the vast majority now working from home, the introduction of social distancing and less access to printing and the post, it has added another layer of complexity to the way we execute documents remotely.
It is currently accepted, and the Law Commission’s report on the electronic execution of documents in 2019 confirms, that electronic signatures are valid provided that the parties to the documents have complied with all other execution formalities as prescribed by the Companies Act 2006. Therefore, the execution of simple contracts is relatively straightforward.
Where a document is required to be signed as a deed the documents can still be signed electronically, however the complexity occurs around the requirement for the signatures to be witnessed.
Although there is commentary to suggest otherwise, the current view of the Law Commission and our own view is that a witness must be physically present in the same location as the party who is signing the deed. There may be developments in this area as the COVID-19 restrictions continue.
Ordinarily, best practice is for a witness to be an independent third party, if that is not possible, there is no prohibition at law for the witness to be a spouse or family member.
Other practical points:
Request that certain signatories appoint an attorney to sign on their behalf. This could limit the number of different individuals who would need to sign as part of the completion and therefore make it more efficient.
When a signatory to a deed is a corporate, consider arranging for the document to be executed by two directors instead of a director signing the document in the presence of a witness, (providing the articles of association of that company and/or any shareholders’ or investment agreements do not contain any prohibitions on such).
To request that the signatory and witness confirm over email that they are in the same location.
Service Agreements: Termination as a result of insolvency?
The Corporate Insolvency and Governance Bill (the Bill) 25 June 2020 includes new prohibitions on suppliers’ ability to terminate their agreement following the other party entering into an ‘insolvency event’.
The Bill includes the following prohibitions on the Suppliers’ termination rights:
- terminating the agreement or doing ‘any other thing’ as a result of the other party’s entering into an ‘insolvency event’;
- terminating the agreement for breaches which had occurred prior to the other party entering into an ‘insolvency event’; and
- making payment of pre-insolvency debts a condition of the future supply of services.
A Supplier will need to continue providing services despite the other party entering into an ‘insolvency event’, subject to any of the exemptions listed below.
The Bill includes the following exemptions to the above prohibitions:
- any new breach of agreement, that occurs after the other party has entered into an ‘insolvency event’ (including a breach of payment obligations);
- with the consent of the other party or the insolvency office holder; and
- with the permission of the court (provided that the court is satisfied that such performance would cause the supplier ‘hardship’).
‘Small entities’ will be excluded from the Bill for a period of one month following its commencement (until 25 August 2020). To qualify as a ‘small entity’ the supplier must meet any two of the following criteria:
- turnover was not more than £2 million;
- balance sheet was not more than £1 million; and
- does not employ more than 50 employees.
Retention of title – are your goods protected?
Retention of title clauses are crucial for any supplier who allows their customers to make payment in arrears or post-delivery of the goods.
|Clause / Buyer’s Obligation||Purpose|
|Store the goods separately.||The goods must be capable of being clearly identified should the supplier (or its agents) need to enter the buyer’s place of business to repossess the goods.|
|Allow the supplier to access the buyer’s place of business|
|Ensure the goods are marked as the supplier’s property.|
|Proceeds of sale||To allow the supplier to assert their rights to any proceeds of sale from the buyer selling the goods, in order to satisfy any outstanding monies owed.|
|Mixed goods||Allows the supplier to assert their rights of ownership over the mixed goods (the supplier’s goods when combined with others).|
Do your contracts for the supply of goods contain the relevant terms and conditions to ensure you are protected?
If you would like to discuss these subjects further, please contact us.