Electronic signatures - when can I use them and when can't I?

Friday, March 20, 2020

While many businesses have been signing electronically for some time, the current environment has a number of businesses seeking clarity on what they can and cannot sign electronically.

Part 4 of the Contract and Commercial Law Act 2017 (CCLA) (previously the Electronic Transactions Act 2002) clarifies the legal requirements regarding electronic signatures.

When can I use an Electronic Signature?

Subject to a few exceptions referred to further below, the general position under the CCLA is that electronic signatures can be used and will be considered just as valid as written signatures as long as certain requirements are met and the parties consent. This means in practice you can sign the following documents electronically:

  • Agreement for Sale and Purchase of Real Estate;
  • Commercial agreements;
  • Leasing documentation;
  • Director resolutions;
  • Shareholder resolutions; and
  • Trustee Resolutions

When can I not use an Electronic Signature?

Schedule 5 of the CCLA provides a list of examples where an electronic signature cannot be used. These include but are not limited to:

  • Wills, codicils or other testamentary instruments;
  • Affidavits;
  • Statutory Declarations;
  • Other documents that are given on oath or affirmation; 
  • Powers of Attorney and Enduring Powers of Attorney; and
  • Information that is required to be given in writing in person, unless the person receiving the electronic signatures consents.

What about deeds?

Deeds can be signed electronically, but there are important points to consider in terms of formalities. For New Zealand companies, a deed must normally be signed by two directors or, if there is only one director, by that director in the presence of a witness.

In the case of two directors, each director can sign in counterparts using electronic, wet ink signatures or a combination of both. However, if a sole director is signing in the presence of a witness, the witness must observe the director's signature first before signing themselves (electronically or by wet ink).

Best practice is for the witness to be physically present (not by audio-visual technology) when observing the director's electronic signature. The usual requirements in relation to witnesses still apply to electronic signatures i.e. the witness should not be a party to the deed and should be adequately identified by stating their name, address and occupation.

Is an electronically signed document an "original"?

Yes. If a document has been signed electronically it will constitute an original document provided the electronic signing method reliably assures the integrity of the document. In practice this means taking steps to ensure that the document cannot be tampered with or changed after signing (other than by using the same amendment rules that apply to wet ink documents).

What about land transactions in light of COVID-19?

In order to deal with any transactions involving land, parties are required to complete a Client Authority and Instruction Form (A&I) which is available through Land Information New Zealand (LINZ). Section 7 (1) of the Authority and Identity Requirements for E-Dealing Standard 2018 (LINZS20018) requires that the client be present "in person" to sign the A&I in front of a suitable witness. Therefore, the use of electronic signatures do not satisfy these requirements.

Given the current situation, the "in person" requirement presents some challenges where many parties are choosing or are being required to self-isolate. As it stands, the Authority and Identity Requirements for E-Dealing Guideline 2018 (LINZG20775) (Guidelines) set out when lawyers and clients may be able to use audio-visual technology to execute A&I's.

The Guidelines state that audio-visual technology may be used to obtain authority and verify identity, provided the lawyer:

  • has known the existing client for more than 12 months;
  • holds a copy of the client's acceptable photo ID (that is current or expired within the previous 12 month) on file; and
  • is able to simultaneously see and hear the client and clearly see what documents are being signed for the duration of the identity verification session.

The Guidelines further state that audio-visual technology must not be used if the practitioner:

  • has doubts as to the identity or capacity of the client;
  • has concerns that the client may be acting under duress or at the direction of another person; or
  • is not able to simultaneously see and hear the client and clearly see what documents are being signed for the duration of the identity verification session.

LINZ has confirmed that they will be publishing updated guidance on this and other possible approaches to verifying A&I's over the coming days.

In the meantime, while audio-visual methods of signing and witnessing A&I's are available in certain circumstances, these situations will need to be approached by practitioners on a case by case basis.

If you have any questions about signing documents electronically, please feel free to get in touch with a member of our data protection and privacy team. 

 

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.‚Äč

 

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