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Companies, Partnerships and Directors

Electronic signatures

It is second nature that any important documents must be signed, but is there legal magic to a swirling "wet ink" signature or are they simply a barrier to progress?

  • What is a signature?

      In the EU anything that authenticates data or links it to its creator can be defined as a signature. In practical terms this catches everything from typing your name at the end of an email to clicking an “I accept” button while shopping online. At higher levels of security a document can be encrypted with an algorithm or “private key” unique to the sender, then decrypted with an equivalent “public key” given to the receiver.

  • Security issues

      It is natural to question whether switching from paper to digital signatures could open up a host of new risks, but in practice a huge amount of business and communication has already moved online. There are a multitude of companies providing layered security for online transactions, and the technology is already widespread. Large, security focussed organisations such as the United States Department of Defence have now switched to using secure electronic signatures.

  • The law

      Electronic communication is an area in which the UK courts have taken a modern and flexible approach. In a 2010 case the Court of Appeal accepted that simply typing a name at the end of an email could qualify as a binding signature in writing – in that case allowing an insurance guarantee to be concluded. Likewise in 2011 the High Court considered that when using “SWIFT” (a secure international messaging system) the fact that the sender’s name automatically appeared in the heading was sufficient to qualify as a signature. Both of these cases highlight that we must be cautious in what we put in writing electronically, and be aware of the dangers of a hacked email account; if a signature can be forged by just typing a first name then secure e-signature software begins to look more appealing.

      It seems that traditional ink and paper still hold sway in property matters. There have been no cases yet to suggest that deeds can be electronically signed, and the UK Land Registry also only accepts documents concluded by wet ink signature. However in recent years there have plans to bring the conveyancing process completely online. The future of electronic conveyancing movement is still uncertain, but if it gains momentum there is always the possibility of a corresponding push to allow electronic signatures in matters of land.

  • The future

      Outside of property transactions, electronic signatures have been secure, inexpensive and legally acceptable for several years, and there is a continuing drive in all sectors towards conducting business electronically. Perhaps the most significant barrier to their use is the lack of an industry standard – one system which the business community can be confident is widespread and well-known enough to be worthwhile adopting. Such a system could emerge in the coming years, or it may be that the business community will build its own solutions by adopting bespoke systems in partnership with other firms.

      For those tired of the traditional delays in concluding agreements, the Department for Business, Innovation and Skills has published guidance on choosing and implementing e-signature systems at www.gov.uk.