28 April 2020
The global pandemic of COVID-19 is preventing individuals from travelling to sign documents, or being in close proximity with other individuals when signing documents. Consequently, individuals / companies may wish to use electronic signatures as an alternative to the traditional ‘wet-ink’ signatures when signing documents.
What is an electronic signature?
An electronic signature can be described as ‘data in an electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign.’ There are several different forms of electronic signatures including clicking an ‘I Agree’ button on a website, or transferring an image of a signature onto a document. Digital signatures are a form of electronic signatures.
Can an electronic signature be valid?
Whether an electronic signature is capable of being a valid method of execution for a contract falls to the laws of contract. Generally, the Isle of Man follows the same principles to contract law as England and Wales:
- Simple contracts – contracts (with no statutory requirements) can be entered into informally. For example, a contract can be made orally with no form of signature and provided it has all the essential elements of a contract, will be valid. Although it is not necessary, it is common for parties to choose to record their contract by writing and so as long as the parties agree to the use of electronic signatures, this would be perfectly valid.
- Contracts with statutory requirements – some contracts are governed by legislation which requires certain criteria to be fulfilled to make it valid. For example, it may be a requirement for a contract to be made in writing. Recent English case law has confirmed that an electronic signature would fulfil the requirement to be in writing because typing, printing, photography etc, are all deemed to constitute writing.
- Deeds – some contracts must be (or are preferred to be) signed as a deed. A deed must be made in writing to be valid. As outlined above, an electronic signature would constitute writing, so executing a deed by electronic signature would, in principle, be valid.
Are electronic signatures recognised in the Isle of Man?
Following the above, it would seem that documents (whether to be signed under hand or as a deed) are capable of being made electronically in the Isle of Man. This is confirmed in the Electronic Transactions Act 2000 which recognises electronic signatures as a form written communication if the following is met:
- a method is used to identify the individual signing electronically;
- having regard to all the relevant factors, the method is as reliable as is appropriate for that particular document; and
- the other party(ies) to the document consent to the method of electronic signature. “Consent” includes consent which can reasonably inferred from the conduct of the person concerned.
Are there any documents which cannot be validly signed electronically?
The Electronic Transactions (General) Regulations 2017 (“Regulations”) provides that certain documents are deemed ‘excluded transactions’ and would be rendered invalid if it took place by electronic communication. These exclusions include (but are not limited to):
- a marriage – the register of marriage cannot be signed electronically;
- a conveyance or creation of an interest in land – this would include a deed of conveyance for unregistered land, or a transfer for registered land;
- a mortgage or charge of land – this would include a conditional bond & security;
- a testamentary disposition – this would include a last will & testament and any codicils;
- a power of attorney – this would include granting a power under an enduring power of attorney or a general power of attorney and would also include any document containing a power of attorney within the document (ie, most security agreements); and
- security by a company over its undertaking, property or revenue – this type of security would include (but is not limited to) a legal charge, debenture, share charge, assignment of rental income.
Are there any changes because of the Covid-19 crisis?
The Emergency Powers (Coronavirus) (Electronic Transmission of Information – Enterprises) Regulations 2020 (the “Emergency Regulations”) came into force as on 23rd April 2020 and will apply during the coronavirus period. The Emergency Regulations provide an alternative method of signing documents which will need to be registered at the Isle of Man Companies Registry (“Companies Registry”):
- If the document needs to be signed by one signatory – instead of signing in the normal way, the signatory can instead transfer an imagine onto the document electronically, or use a verified 3rd party digital or electronic signature software to sign electronically;
- If the document needs to be signed by more than one signatory – the first signatory can sign electronically (either by transferring an image or using a verified digital signature software as explained above), then must send the document electronically to the second signatory who must sign in the same manner. The last signatory who is required to sign the document must then send the document to the Companies Registry by email; and
- If the document requires a witness – the signatory and the witness can establish electronic communication between themselves, providing they are able to see and hear each other.
This means that during the coronavirus period, it will be possible for Isle of Man companies to sign charges electronically, provided that they need to be registered at the Companies Registry.
The Emergency Regulations also provide that records must be kept of any document which has been signed electronically (by either a signatory or a witness) for a period of 2 years.
Is an electronic signature reliable?
It is important to remember that an electronic signature may have potential issues with reliability. For example, it would be difficult to know for certain whether the individual who is transferring a scanned copy of a signature to a document is in fact the individual whose signature it is. Therefore, this form of signature may not be appropriate for highly valuable / important transactions and instead a digital signature may be more appropriate. Leading providers in digital signatures such as DocuSign and Adobe Sign use technology which can detect whether a signature is authentic and whether the signature has changed after it has been placed. This creates a more reliable and trustworthy form of electronic signature which is far less susceptible to abuse or forgery.
Generally, electronic signatures are a valid method of signing documents in the Isle of Man, except for those documents deemed ‘excluded transactions’. However, the implementation of the Emergency Regulations now provides authorisation for some of these ‘excluded transactions’ to be signed electronically, giving greater flexibility when a signatory is unable to sign in the usual way. Despite this, however, it is important to note that the Emergency Regulations apply only to those documents which need to be registered at the Company’s Registry and is not a general authorisation for any document which is deemed an ‘excluded transaction’ to be signed electronically.
The above material is of a general nature only. It does not constitute legal advice nor does the distribution or receipt of this material create a client-advocate relationship. Readers should seek specific advice in relation to any decision or course of action.
Author: Sarah Wolter
 Article 3(10) Electronic Identification Regulation (EU/910/2014)