Given the potential business disruption triggered by the COVID-19 Coronavirus, we set out here our thoughts on signing and closing logistics when signatories are forced to work remotely.
Virtual signings for loan financings are nothing new. Since the infamous Mercury Tax case in 2008, market practice has settled on established ways for remote signatories to sign, scan and email signature pages so that documents can be executed without the need to handle 'wet ink' signatures. In most cases, if the relevant protocols are followed, this will offer the easiest solution for remote workers, although it does require access to a printer and scanner.
e-signatures were brought into focus recently when the Law Commission issued a report in 2019 confirming their validity. They can take many forms, including a person typing their name into a contract or email, electronically pasting their signature as an image into a soft copy of a contract or using a web-based e-signature platform to sign. The validity of e-signatures depends on a patchwork of unconnected legislation and some institutions regard them with suspicion.
Various platforms (such as DocuSign) allow signatories to execute documents by way of an e-signature on a mobile device, rather than having to print, sign and PDF pages, post them, or attend meetings in person. Whilst we have the capacity to offer DocuSign on transactions, e-signature platforms have not been widely adopted on loan finance transactions and would require additional set-up procedures – arguably unnecessary where a signatory has ready access to a printer and scanner. Some lawyers have reservations about the use of these platforms for deeds and e-signatures are not appropriate for some documents, such as documents to be registered with the Land Registry or stock transfer forms to be submitted to HMRC for stamping (though HMRC have confirmed that they will accept e-signatures on stock transfer forms while temporary COVID-19 stamp duty procedures are in place – for further detail please see Stamp Duty: Temporary COVID-19 procedures)
Given the introduction of travel bans on public health grounds, parties may also consider appointing a power of attorney to sign key documents, to ensure availability of an authorised signatory in the relevant jurisdiction. This will be key, for instance, where a virtual signing is not appropriate.
It is common for board meetings to be held by telephone and/or for board resolutions to be passed by written resolution. These options are usually expressly contemplated by a company's articles to ensure a quorum is available at short notice without the need for a physical meeting.
Despite best efforts to achieve a relatively paper-free transaction, thought may need to be given to the logistics for the physical delivery of original documents and other transaction deliverables (such as share certificates) at a time when offices are closed. Conversely, it may be that copies of documents which are usually sent by post (e.g. notices of assignment) should also be delivered electronically in order for them to receive prompt attention. In respect of documents that need to be stamped, thought should be given to the stamp duty process. HMRC have introduced temporary COVID-19 stamp duty procedures while government social distancing measures are in place – for further detail please see Stamp Duty: Temporary COVID-19 procedures.
For groups operating (or with directors or employees located) in multiple jurisdictions, thought should be given to the tax consequences of the location both of signing and of any meetings to approve the deal. Tax consequences could include (i) creating a taxable presence in a jurisdiction where the business is not currently taxed, through creating a permanent establishment or other fixed place of business or through a company becoming tax resident in a different jurisdiction; or (ii) leading to increased stamp duties, registration duties or similar. This will often be fact specific and advice may be needed in the different jurisdictions concerned.
For full details of the government schemes in place and our other thoughts on the impact of COVID-19, please see our COVID-19 resources page.