Q&A – Business as (un)usual during the COVID-19 lockdown: the practicalities of executing documents, getting documents legalised and holding shareholder meetings
This Q&A is intended to provide guidance to those seeking to navigate the choppy and uncertain waters of the COVID-19 outbreak. It does not constitute legal advice.
How to execute documents?
The stay at home measures implemented by the Government have raised questions about the practicalities of getting documents executed. Here are some answers to common questions that have arisen since the lockdown began on 23 March.
How do I sign a document electronically and are electronic signatures valid?
Electronic signatures can take different forms, such as a signatory typing their name in an email, a scanned written signature, clicking an icon on a website to confirm an order or other more advanced e-signatures available through specific cloud based software, such as DocuSign.
An electronic signature is capable in law of being used to execute a document, provided that (i) the person signing the document intends to authenticate the document and (ii) any formalities relating to execution of that document are satisfied (e.g. the signature being duly witnessed). If you are unsure if these requirements are met please contact a member of the Boodle Hatfield team.
It is also possible for a deed to be executed using electronic signatures. This was confirmed in a recent confirmatory statement of the law issued by the Lord Chancellor on 3 March 2020 made following the Law Commission report on Electronic Execution of Documents. Both the person signing and the witness must be present for the deed to be validly witnessed electronically.
Certain official bodies and registries often insist on having documents with ‘wet ink’ signatures. This normally includes Companies House, the Land Registry and the Stamping Office. Many of these bodies are, however, revising their guidance and changing their practices in light of the pandemic so their websites should be checked prior to the execution of the documents.
Can I witness a deed via video link?
This is not currently permitted and is under review by the Government. Alternatives to using a video call whilst adhering to the Government guidance on social distancing that have emerged are signing and witnessing deeds through a window or car windscreen, which would ensure that the witness could be present to ensure valid witnessing of the deed.
How should a deed be executed by an individual?
If the executing party is an individual, the document will only be validly executed as a deed if it is signed either by the individual in the presence of a witness who attests the signature, or at the direction and in the presence of the individual and the presence of two witnesses who each attest the signature.
Social distancing rules have made finding suitable witnesses more difficult so it is important to note that witnesses cannot be a party to a deed. According to best practice the witness should also be independent (i.e. not a spouse or civil-partner of any of the parties or otherwise having an interest in the deed), but in these times it may be acceptable for a non-independent witness to sign if no other person is available.
How should a deed by executed on behalf of a company?
Generally deeds may be executed on behalf of a company by two directors or one director in the presence of a witness (both the director and the witness must both sign the same document).
In the view of the joint working party of the Law Society Company Law Committee and the City of London Law Society, it is permissible for two directors to sign on behalf of a company even if they sign separate engrossments of a document. This approach is set out in their note on electronic execution published in 2016.
Can I get a document legalised?
In some situations, such as cross-border finance transactions, certain documents have to be notarised or notarised and legalised. This is often the case in civil law jurisdictions such as France, Germany and Spain where an English law document is to be relied upon. In England and Wales, the Legalisation Office, which forms part of the Foreign and Common Wealth Office (FCO), legalises documents by issuing an apostille.
I am working on a transaction where a document needs to be legalised. Can this currently be done?
Due to COVID-19, the FCO is not current legalising documents. It is only possible to obtain an apostille if there are exceptional circumstances.
These are limited and include death/bereavement (such as documents relating to the repatriation of a body), potential imprisonment, potential deportation and any trade/business documents specifically relating to the export of medical supplies.
In the interim, the FCO has provided a letter in lieu of an apostille for notaries to use, although this is not likely to be accepted in other jurisdictions.
What are the alternatives?
Due to the complexities of international law, it may not be possible for a matter to proceed without a document being apostilled. However, we have seen instances of parties waiving the requirement for a document to be apostilled, either entirely or on the basis that it will be apostilled as soon as possible.
What are the practical considerations for holding shareholder meetings during the pandemic?
Our AGM usually takes place at this time of year, can it still go ahead?
The restrictions on gatherings of more than two people and non-essential travel makes holding an AGM very difficult unless it is required for essential for work purposes.
A company’s articles of association (its “Articles”) should be checked to see whether they permit online general meetings. If such meetings are not permitted, a special resolution to change the Articles to permit a virtual or hybrid meeting could be passed by a shareholders’ written resolution.
The usual rules relating to quorum and voting would apply as set out by the Articles, or as determined by the Companies Act 2006. If an AGM was called before the lockdown started, the directors of the company will have to consider how to adjourn the meeting to a later date, what shareholder approval would be required to do this and how to notify shareholders of the changes.
Can “in person” general meetings take place even if most of the shareholders cannot attend?
If a company only has no more than one or two shareholders, provided holding a general meeting constitutes essential business, the meeting can go ahead. Assuming that the quorum for a meeting is two, a meeting could theoretically take place behind closed doors with only two shareholders attending. Depending on the nature of the company and the number of shareholders, this could cause concern for the shareholders that do not attend.
Another option would be for the meeting to go ahead by shareholders appointing a proxy to attend in their place. For example, a company director may be able to hold the meeting in his or her household using another family member as proxy appointed by the shareholders. Subject to the Articles of that company, this would be a quorate meeting.
How can resolutions be passed without a general meeting?
If holding a general meeting is not feasible, it would nevertheless be possible for a private company to pass resolutions using the written resolution procedure. In short, this involves circulating a resolution around the shareholders entitled to vote on the matter, with the resolution being considered passed as soon as the requisite majority has been obtained. Please note that this procedure cannot be used to remove a director under s. 168 of the Companies Act 2006 or its auditors under s. 510 of the Companies Act 2006.