Original transaction documents: are they still necessary?

October 2, 2013

Mercury


It has been a good few years since the decision by the High Court in R (on the Application of Mercury Tax Group Limited and another) v HMRC [2008] EWHC 2721 (Mercury), in which the Court found that a signature on an incomplete draft deed could not be transferred to an amended final version and thereby constitute effective execution. 

Various judicial comments in Mercury created some uncertainty regarding the effectiveness of virtual signings/closing, i.e. where the signatories are not physically present for signing and signature pages are instead circulated by email or fax. For example, it was said that “the signature …must form part of the same physical document” when the deed is signed.


The JWP guidance note

In response to this and, in an attempt to restore an element of certainty to the virtual execution of documents, a joint working party of the Law Society Company Law Committee and the City of London Law Society Company Law and Financial Law Committees (JWP) published a guidance note in May 2009 (which was approved by Leading Counsel Mark Hapgood QC). The JWP made minor amendments to its note in February 2010, and at the same time, the Law Society published a practice note on the subject, largely reflecting the main principles of the JWP note.

The guidance note sets out non-exhaustive good practice guidelines for such signings in respect of documents governed by English law. Whilst the list is non-exhaustive and there may be other ways to conduct virtual signings/closings, the guidelines represent a cautious approach, in light of Mercury.


The guidelines for virtual signings/closings

As a preliminary matter, you must ensure that each contracting party participating in the virtual signing is made aware of the need for an authorised person to be available remotely, i.e. online, at the time of the virtual signing/closing. The authorised person must be available to receive and approve the final versions of the documents and sign the relevant documents. He will also need access to a PDF scanner.

Where the type of document involved is a deed, the following steps should be followed:

  1. All parties’ lawyers agree to the proposed arrangements for the virtual signing/closing beforehand.

     
  2. Final execution copies of the relevant documents are e-mailed as either PDF or Word attachments to all parties or their lawyers. A PDF or Word document of the relevant signature page may be attached separately if desired, but it should be made clear which document the signature page relates to.

     
  3. Each signatory prints and signs the signature page only. The signatory is not, however, required to print off the full document.

     
  4. Each party e-mails to their lawyers or to the coordinating lawyer (1) the final version of the PDF or Word document and (2) a PDF copy of the signed signature page by way of attachments, again making clear which document the signature page relates to.

     
  5. It is important to note that in the case of deeds, it must be made clear when delivery is to take place, or alternatively, you should make clear that the deed has not been delivered merely because it has been signed and the above steps have been followed.

     
  6. At or shortly after signing/closing, a final version of the document together with copies of the executed signature pages may be circulated by one of the law firms in order to evidence the execution of the final document.


Where the document is not a deed (or a real estate contract), the guidelines state in respect of step 4 that each party may e-mail to their lawyers or to the coordinating lawyer its signed signature page as a PDF attachment along with its authority to attach it to the final approved version of the document. By contrast, it is not necessary for the party to return the final version of the PDF or the Word document as an attachment; the signature page will suffice. However, our view is that it would be prudent to follow the above steps without distinguishing between deeds and documents which are not deeds. 


Do I need originals?

The JWP and Leading Counsel suggest that the final version of the PDF or Word document and the PDF of the signed signature page attached to the same email, will constitute an original signed document. It will amount to the “same physical document,” as referred to in Mercury.

The guidance note states that one or more additional originals may be created by printing off the final execution copy of the document and attaching it to the PDF copy of the signed signature page.

If the virtually signed documents will constitute an original signed document, it begs the question – are “wet ink” originals still necessary? The answer is probably maybe!

i. Registry

“Wet-ink” originals are still required for registration purposes, i.e. in respect of the original documents which need to be filed with various government agencies, in order take effect or afford any legal protection.

This would apply, for example, to charges which need to be registered at Companies House within 21 days. Another example is in relation to stock transfer forms, of which the original “wet-ink” documents must be sent to the Revenue for stamping. In such cases, you should make arrangements to obtain an original of the document containing the original “wet-ink” signatures and may wish to secure appropriate undertakings.

ii. Court cases

Generally speaking, there is no default obligation by which original documents must be produced before the Court. When it comes to disclosure, the Court would not expect parties to disclose original documents, and copies will usually suffice. However, it is possible for a party to request that the opposing party produce original documents, for example where it is suspected that a document is not genuine or is forged. In those circumstances, a party would need to produce the original document, unless it has a good reason why it is unable to do so, i.e. the document no longer exists.


Summary

Apart from this, is it still strictly necessary to compile original documents? It seems that, with one or two exceptions required for registration, the answer is: no. Nonetheless, as a matter of best practice, our opinion is that it remains useful to compile original documents particularly if a dispute may arise in the future. 

 


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