In-house legal teams face increased pressure to do more while cutting costs and improving efficiency. Businesses worldwide are replacing manual processes with electronic alternatives. However, legal teams cannot always keep up with the pace. This is partly due to limitations imposed by operative regulatory frameworks. This article will explore why your in-house legal team should consider using e-signatures and electronic execution, and the challenges they may encounter.
How COVID Created Change
The lockdown measures imposed as a result of the COVID-19 pandemic have forced the legal industry to reconsider its practices. Moreover, it has kick-started the widespread adoption of new ideas and new technology. Pre-COVID, signing a document electronically remained a cause of discomfort for the legal industry. It was largely unexplored as parties doubted the enforceability and underestimated the benefits. With lockdowns in full swing, parties could no longer meet in person to execute their documents and e-signatures and electronic execution became the norm. The progress in the legal industry through adopting technology and new processes, including electronic execution, is here to stay.
What is an E-Signature?
A signature is a legal concept, capturing the signatory’s intention for the document they are signing to bind them. It is a visible representation of that person’s name or mark on the document. E-signatures are a form of signature that can take the form of a person:
- pasting a digital version of their physical signature into the document;
- using e-signing software (such as DocuSign);
- signing a soft copy of a document on a touchscreen (using a stylus or their finger); or
- typing their name in an email.
The broad category of e-signatures includes digital signatures, which require cryptographic authentication technology.
A digital signature is unique to each signatory, similar to a handwritten signature. This is possible through the use of a specific protocol called public key infrastructure. Such technology provides additional security. For example, it marks the document with the time of signature and invalidates the signature if the document is altered.
Continue reading this article below the formAre Electronic Signatures Valid?
Yes, it is legally valid to use an e-signature, most of the time. In Australia, several cases support the validity of e-signatures for most purposes. Additionally, e-signatures have validation from the Electronic Transactions Act 1999 (Cth) (the Act) if they comply with the following requirements.
Identification
The method of signature must enable the person to be identified and indicate the person’s intention in respect of the document.
Reliability
The method must be as reliable in light of the circumstances, including the type of agreement the person is signing.
Consent
The other party to the document must consent to the person signing the document using an e-signature. This requirement is generally met by that party also signing the document electronically.
In response to COVID-19 lockdowns, the Federal Government introduced temporary measures which allowed companies to execute documents electronically under the Corporations Act 2001 (Cth). These temporary measures became permanent by amendments to the Corporations Act in February 2022, a welcome change for many businesses. The amendments to the Corporations Act now allow companies to sign documents (including deeds) under sections 126 or 127 in electronic form using electronic means. They also allow for split execution. This means you can sign documents in counterparts using different execution methods. For example, one party may sign one copy in wet ink while the other party signs another copy electronically.
Switching to Electronic Execution
In-house lawyers often rely on external law firms to manage the initial phase of creating legal documents, such as drafting and negotiating. However, in-house teams often control this process when it comes to executing these documents. Generally, this is better from a relationship management perspective. Like any disruptive technology, electronic execution may require you to adapt and adjust some of your practices. However, in-house teams are in a strong position to lead transformation in this area.
Time Management
Firstly, printing, faxing, mailing, copying, scanning and filing in paper formats is exceptionally time-consuming. Using e-signatures also releases some of the time pressure associated with executing a document, where the stakeholders sometimes only have a small window in which to sign the document physically.
Control Over the Status of the Transaction
Secondly, pre-execution, the rights and obligations of the parties are not yet enforceable. In the context of a transaction involving a high volume of documents and different stakeholders, not knowing the status of the transaction can be stressful. E-signing platforms can, therefore, provide a clear picture of what’s outstanding and generate reports.
Improved Security
Once you affix a digital signature on a document, you cannot alter it. Otherwise, the signature may be invalid. The requirement of paper documents means a risk of loss, destruction and incompleteness. This is mainly because documents sometimes travel around the country to reach signatories. Accordingly, the process of electronic execution reinforces the security around executing documents.
Simplified Record Keeping
Electronically signing documents allow you to search or edit them if the parties decide to amend the document. As soon as the parties properly execute the document, each party has access to it. Accordingly, this eliminates the usual delay in providing final documents to each party. There is also no longer a need for bulky physical storage space, where originals risk being damaged or lost.
Reduced Costs
The advantages not only improve the overall efficiency of the process, but significantly reduce operational costs. Depending on the scale of the transaction, the execution process can require a full-time paralegal and a storage facility to archive the documents.
Additionally, the business will bear administrative costs such as mail and filing. An electronic process cuts out the need for many of these costs.
Reduced Carbon Footprint
Legal documents are commonly printed single-sided, amounting to high volumes of paper. In addition to not being environmentally friendly, it is impractical and unnecessary. By using electronic copies, your business can reduce its carbon footprint.
Less Room For Incorrect Execution
If you receive a document through an e-signing software or platform, the sender will clearly identify throughout the document whether you should:
- sign;
- tick a box; or
- enter a date.
Ironically, although many people still see e-signatures as controversial, electronically executed documents are more likely to be executed appropriately. Therefore, they are more likely enforceable than wet-ink signed documents.
Better Client (and Lawyer) Experience
Finally, most lawyers have experienced standing in a room with a client or a colleague while signing piles of documents. This is not a particularly pleasant moment. E-signing contributes to an improved overall experience for all parties.
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Key Takeaways
E-signatures have become the norm. In-house teams can access a long list of benefits by transforming document execution processes. For example, this includes reduced costs, increased accuracy and security and a better experience for all parties. Australian law is also encouraging this transition. Having an internal policy setting out which agreements can be signed electronically and how will help provide certainty around this new process.
If you need help transitioning to e-signatures, our experienced legal transformation lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
A signature is a legal concept, capturing the signatory’s intention for the document they are signing to bind them. It is a visible representation of that person’s name or mark on the document. E-signatures are a form of a signature that can take the form of a digital version of a physical signature, using e-signing software, signing a soft copy of a document on a touchscreen or typing a name in an email.
Yes. In response to COVID-19 lockdowns, the Government introduced temporary measures which allowed companies to execute documents electronically under the Corporations Act 2001 (Cth). These temporary measures became permanent by amendments to the Corporations Act in February 2022, which now allow companies to sign documents (including deeds) under sections 126 or 127 in electronic form using electronic means.
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