In response to shelter-in-place measures and social-distancing restrictions, most companies have implemented a home-working policy as their business continuity solution. However, this new arrangement can impede a company’s normal operations, particularly as it relates to authenticating documents, as in-person signing is not practicable at this time.

Utilising digital or electronic signatures can potentially be the solution to this problem.

Bermuda law permits the use of electronic signatures under the Electronic Transactions Act 1999, which was established to facilitate electronic transactions and promote confidence in the validity, integrity, and reliability of conducting transactions electronically, among other things.

The ETA provides that information, including signatures, will not be denied legal effect, admissibility or enforceability solely because it is in the form of a record that was created, stored, generated, received or communicated by electronic means. In essence, the ETA gives electronic signatures the same legal effect as wet-ink signatures.

Careful consideration of the ETA is necessary to ensure the validity and legality of electronic signatures, as it governs the use of digital signatures and electronic records generally. More specifically, it is important to ensure that e-signatures satisfy the legal requirements under the Act.

These requirements include, but are not limited to, that the signature must be uniquely linked to the signatory, capable of identifying the signatory, created using means that the signatory can maintain under their sole control, and it must be linked to the information to which it relates in such a manner that any subsequent alteration of the information is revealed.

Section 11 of the ETA provides that where a person’s signature is required by law, that requirement is met by an electronic record if the method used is able to identify the signatory and to indicate that the signatory intended to sign the document or otherwise adopt the information in the electronic record. In addition, the method used must be reliable, as appropriate, for the purpose for which the electronic record was generated or communicated.

Similarly, where information is required by law to be in writing, the ETA authorises the use of electronic signatures as a valid means of satisfying such requirement, provided the information contained in the electronic record is accessible and capable of retention for subsequent reference.

Where the law requires information to be presented or retained in its original form, the ETA provides that this requirement is met by an electronic record of the information if a reliable assurance exists of the integrity of the information from the time it was first generated in its final form as an electronic record or otherwise. Further, where the requirement is for the information to be presented, that information must be capable of being accurately represented to the person it will be presented to.

To safeguard the validity and security of electronic signatures, the ETA provides for the use of certification service providers that issue identity certificates for the purposes of e-signatures, among other things. The ETA requires that certification service providers meet certain criteria and issue an accredited certificate that associates unique data that is used to verify an electronic signature to a person and confirms the identity of that person.

An authorised certification service provider will be liable to a person where it has issued an accredited certificate and that person reasonably relied on the certificate for the accuracy of the information in the certificate as from the date it was issued, among other things, unless the person who relied on the certificate knew or ought reasonably to have known that the authorisation of the certified service provider had been revoked.

To avoid liability and ensure due diligence the Government issued the Certification Service Providers (Relevant Criteria and Security Guidelines) Regulations 2002, which provide an authorisation scheme for certification service providers and helpful guidance to such bodies.

It is important to note that the use of electronic signatures is not permitted in relation to certain documents, namely the creation, execution or revocation of a will or testamentary instrument and the conveyance of real property or the transfer of an interest in real property, as they are expressly excluded under the Act.

Some practical points to consider when using e-signatures include, but are not limited to, reviewing the company’s byelaws to determine whether they contain any restrictions or requirements relating to the execution of documents; considering whether hard copies of the documents need to be filed, and if so, whether the traditional physical signing is required; verifying that the e-signature complies with any applicable execution formalities; and considering the legal consequences of the place of signature, particularly as it relates to tax implications.

As the COVID-19 pandemic forces us to exercise social distancing measures to mitigate its spread, companies may find it helpful to have regard to this and other legal guidance to aid in signing documents virtually.

Type

Insight

Locations

Bermuda

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