Electronic signatures (e-signatures) provide flexibility and efficiency in cross-border transactions, are virtually accessible from anywhere in the world, and, given the advancements in digital signature technology, provide arguably greater security than scanning and emailing wet-ink signatures.
Unsurprisingly, e-signatures are increasingly popular, and on 1 July 2016 the European Union’s legal framework for e-signatures came into effect via the eIDAS Regulation[i].
In comparison, the BVI passed similar legislation 15 years ago and was one of the first to recognise the validity of e-signatures and electronic records. The BVI Electronic Transactions Act, 2001 (the ETA) sets out the requirements for a legally binding e-signature under BVI law. This recognition of e-signatures along with other BVI statutory developments (such as simplified requirements for the execution of contracts) provides flexibility in cross-border transactions involving BVI companies.
This article considers what e-signatures are and when they can be used under BVI law.
What are e-signatures?
The ETA defines “electronic” as electrical, digital, magnetic, optical, electromagnetic, biometric and photonic. In practice, e-signatures may take on a number of forms including: (a) bitmap signatures (ie scanned images); (b) biometric signatures which require a special writing pad that records strokes and pressure; and (c) digital signatures which utilise cryptography technology – the most advanced and widely used form of e-signature.
When can e-signatures be used?
E-signatures can be used in most transactions involving a BVI entity or the laws of the BVI, but there are some exceptions:
Director and member resolutions: E-signatures can be used. The BVI Business Companies Act, 2004 (the BVI BCA) permits both director and member resolutions of BVI companies to be in the form of written resolutions. They need to be consented to in writing or by telex, telegram, cable or other written communication. Written resolutions can consist of several documents, including written electronic communications in like form that are each signed or assented to by one or more directors or members (as applicable).
Agreements signed underhand: E-signatures can be used.
Deeds: The ETA’s definition of legally binding e-signatures does not currently apply to deeds, although it is anticipated that the BVI legislative authorities will soon redress this to reflect the increasing use and development of e-signatures in the 15 years since the ETA was introduced[ii]. In the absence of statutory guidance on valid e-signatures for deeds, specific BVI legal advice should be sought on a case-by-case basis on the e-signature execution of deeds by a BVI entity.
It is worth noting that: (a) a foreign entity can validly sign a BVI law deed using an e-signature, provided the laws of the foreign entity permit the use of e-signatures; (b) it is fairly common to draft security documents as a deed when the security document does not actually have to be a deed; and (c) pursuant to the latest amendments to the BVI BCA it is possible to pre-sign deeds and physically or electronically add them to the remainder of the deed – so a wet-ink signature could be obtained from a signatory in advance of closing.
What requirements must be met for an e-signature to be valid?
Under the ETA the legal requirement for a signature is satisfied by an e-signature if: (a) the e-signature adequately identifies the signatory; (b) the electronic record adequately indicates (i) the signatory’s approval of the information to which the signature relates, or (ii) for the witnessing of a signature or a seal, that the signature or seal has been witnessed; (c) the e-signature is as reliable as is appropriate given the purpose and circumstances in which the signature is required; and (d) the “recipient/counterpart” of the e-signature consents to receiving the e-signature and the e-signature of each witness (if applicable).
It is also presumed that an e-signature is valid and enforceable if: (a) the means of creating the e-signature is linked to the signatory and no other person; (b) the means of creating the e-signature was under the control of the signatory and no other person; (c) any alteration to the e-signature made after the time of signing is detectable; and (d) where the purpose of the legal requirement for a signature is to provide assurance as to the integrity of the information to which it relates, any alteration made to that signature after the time of signing is detectable.
Most of today’s digital signature technology is designed to meet the requirements set out above, by providing security measures that authenticate the signatory and preserve document integrity.
When might the use of e-signature not be ideal?
Notwithstanding the growing attractions of e-signatures, there are also a number of other instances in which the use of wet-ink signatures may be more appropriate. These include: (a) where parties prefer to exchange wet-ink signatures at a formal closing; (b) where documents need to be notarised (depending on the laws of the jurisdiction); or (c) where the document has to be filed with an authority or registry which requires wet-ink signatures.
[i] EU Regulation No. 910/2014. Although it should be noted that irrespective of Brexit, the BVI is not part of the European Union.
[ii] Other categories of documents for which the definition of legally binding e-signatures does not apply to include: (a) the creation, execution or revocation of a will or such other testamentary instrument, (b) the conveyance of real estate or the transfer of any interest in real property and (c) any other matter prescribed by the ETA regulations (currently none). Unlike other e-signature legislation which provide for regulations to increase the use of e-signatures, the ETA provides for regulations to reduce the scope of e-signatures, suggesting that the draftsmen intended to periodically overhaul the legislation to match a fast evolving technology.