How to exchange and complete a business deal virtually

Jonathan Lea November 14, 2019

In today’s day and age virtual exchange and completion is becoming increasingly sought after, especially in relation to transactions that involve multiple parties who may be located in different jurisdictions.

Whether a document has been validly executed will depend on the type of document that is being signed. The Law Society Company Law Committee and the Company Law and Financial Law Committees of the City of London Law Society have published a guidance note (known as the CLLS Note) which provides detailed guidance on how to sign specific documents virtually.

Option 1 – Counterparts signed by each party

This is the only recommended option for signing a deed virtually and the process is as follows:

All parties agree the agreement/deed is in final form and ready for signing.
One party circulates the execution version of the agreement/deed to all parties and/or their respective solicitors for signing.
Each signatory prints their name and signs the relevant execution block.
Each signatory circulates their signed version of the agreement/deed (body and signature page to ensure that it is considered to be the “same physical document”) to the other party. In the case of a deed, the parties will need to agree when the deed is deemed to be ‘delivered’, which may not automatically occur when it has been signed.
On or immediately after signing it is good practice for one of the parties to compile and fully signed version of the agreement/deed and circulate it to the other parties, for their records.

Option 2 – Signing the signature pages only

This option is not suitable for deeds but may be used to execute contracts or guarantees and the process is as follows:

All parties agree the agreement is in final form and ready for signing.
One party circulates the execution version of the agreement to all parties and/or their respective solicitors for signing.
Each signatory prints their name and signs the relevant execution block. There is no need to print the entire document, just the signature page.
Each signatory emails their signed signature page to their solicitor with the authority to attach the signed signature page to the execution version of the document. A signed signature page attached to the execution version of the document will together constitute the signed document. The degree of formality required for this authority to be given will depend on the circumstances and a greater degree of formality may be appropriate in relation to a solicitor who is not acting for the signatory. This is the only difference between options one and two.
On or immediately after signing it is good practice for one of the parties to compile and fully signed version of the agreement and circulate it to the other parties, for their records.

Option 3: Pre-signed signature pages before documents are in final form

This option is not suitable for deeds but may be used to execute contracts or guarantees and the process is as follows:

One party circulates the signature pages of the draft document that is subject to negotiation to all parties and/or their respective solicitors for signing. It is good practice for each signature page to identify the agreement that it relates to (e.g. ‘Asset Purchase Agreement – signature page’).
Each signatory prints their name and signs the relevant execution block and returns their signed signature page(s) to their solicitor to hold until the document that it relates to is in final form.
Once the document is in final form and each party has authorised their solicitor to attach their signed signature page to the document that it relates to then the document is dated and released to the other parties, for their records. The degree of formality required for this authority to be given will depend on the circumstances and a greater degree of formality may be appropriate in relation to a solicitor who is not acting for the signatory.

Electronic signature

The Law Society recently published a practice note on eSignatures in relation to deeds, which confirms that a deed can be validly executed with an electronic signature. One of the ways in which a deed can be validly executed by a company incorporated under the Companies Act 2006 is by signature by two directors or by one director and the company secretary (authorised signatories).

This can be achieved by each of two authorised signatories signing the deed (using an electronic signature or another acceptable method) either in counterpart or by one authorised signatory signing, followed by the other adding his or her signature to the same version (electronic or hard copy) of the deed. Delivery can be achieved through electronic signing, but the parties will have to take steps to ensure the signing arrangements adequately address when delivery takes place, particularly if the parties propose that their solicitors hold their signed documents to the order of the relevant party prior to the deed coming into effect.

One of the ways in which a deed can be validly executed by an individual is if it is signed in the presence of a witness who assets the signature (section 1(3) of the LP(MP)A 1989). Section 44 of the Companies Act 2006 provides that an instrument is validly executed as a deed by an individual (including an individual acting under a power of attorney) if it is signed by him in the presence of a witness who attests the signature. A deed can be validly executed by a company incorporated under the Companies Act 2006 if it is signed on behalf of the company by a director of the company in the presence of a witness who attests the signature.

Where a suitable signatory signs a deed using an electronic signature and another individual genuinely observes the signing (i.e. he or she has sight of the act of signing and is aware that the signature to which he or she is attesting is the one that he or she witnessed), he or she will be a witness for these purposes. If that witness subsequently signs the adjacent attestation clause (using an electronic signature or otherwise), that deed will have been validly executed. It is best practice for the witness to be physically present when the signatory signs, rather than witnessing through a live televisual medium (such as a video conferencing facility), in order to minimise any evidentiary risk as to whether the person genuinely witnessed the signing.

Electronic signature platforms

There are now various electronic signature platforms that enable parties to complete transactions without meeting in person, such as DocuSign and Adobe Sign.

These eSignature platforms are becoming increasingly common, and more importantly, the eSignatures they create are recognised as legally binding by the Courts in England and Wales. Golden Ocean Group v Salgaocar Mining Industries [2012] held that contracts cannot be denied enforceability merely because they are concluded electronically. However, there may be some documents which aren’t appropriate for eSignature platforms such as certain types of deed and lease documents. It is therefore imperative to ensure that the agreement that is going to be entered into can be validly signed electronically, otherwise it may not be enforceable.

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This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited 2023.