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Business Law Update: How to run a business effectively in light of COVID-19 – electronic signatures and document filings

19 May 2020

The COVID-19 pandemic has resulted in widescale disruption for businesses the world over, including significant challenges on their ability to function effectively due to social distancing restrictions and the extraordinary and immediate change to normal working practices.

Businesses will have to adapt and evolve their practices to ensure that they can continue to operate as effectively as possible in these challenging circumstances, whilst being mindful of any legal, regulatory or constitutional requirements.

Using electronic signatures

Many business already use electronic signatures for day-to-day contracts, however the current crisis means almost all businesses are being forced to adapt their practices. HMRC has also had to adapt their policy and will now accept e-signed stock transfer forms (see the section below for more detail on this).

In most circumstances electronic signatures can be used to execute documents (including deeds) and are legally valid under English law, provided that the person signing the document intends to authenticate the document and any execution formalities (such as witnessing) are adhered to.

Electronic signatures will not be suitable in all circumstances and the following practical considerations should be taken into account when using electronic signatures:

  • the term ‘electronic signature’ covers everything from a scanned manuscript signature added to documents, typed signatures, clicking ‘I accept’ on a website, and using an e-signing platform, however, consider ease of use and security issues when choosing a method of e-signing;
  • using a sophisticated e-signature platform could alleviate concerns around confidentiality and security;
  • deeds require a witness to be physically present when the deed is signed, even if both signatory and witness are using electronic signatures. It is not possible to witness a deed remotely (e.g. via video link);
  • it is best practice for witnesses to be independent from the signatory (i.e. not a family member), however, that is not a legal requirement and family members can act as witnesses if they are the only person available. Any person who is over the age of 18 and is not party to the deed in question can be a witness;
  • companies may be able to sign deeds by two authorised signatories and there is no requirement for the two signatures to be applied at the same time;
  • check requirements of any relevant registries or regulators, some may accept electronic signatures during the pandemic.

Stock transfer forms submitted to HMRC

In light of the current crisis, HMRC is requiring all stock transfer forms and other transfer documents (including Form SH03) to be sent to HMRC by email to: stampdutymailbox@hmrc.gov.uk. HMRC will accept e-signatures. All payment of stamp duty must also be made electronically and details of the transaction must be sent to HMRC by email rather than by post.

Companies House has also confirmed that it will accept and register an unstamped Form SH03 where it is accompanied by a letter from HMRC confirming that the correct duty has been paid.

If you have sent any forms to HMRC by post since the lockdown measures were implemented, you will need to resubmit the forms electronically and provide details of any payments already made.

Although HMRC are accepting stock transfer forms submitted electronically, the Companies Act 2006 generally prohibits a company from registering a transfer of shares unless a proper instrument of transfer has been delivered to it for registration. Before relying on an e-signed, electronic copy of a stock transfer form to register a transfer, the directors will need to be satisfied that the transfer has been duly executed and is genuine. The transfer provisions in a company’s articles should also be checked to ascertain whether the original stock transfer form must be submitted for registration.

Filing accounts at Companies House

Businesses can apply online for a three month extension to file their accounts with Companies House, to avoid penalties usually levied for late filing. Companies citing issues around the current crisis will be automatically and immediately granted the extension.

If a company has already extended its filing deadline, or shortened its accounting reference period, it may be ineligible for the extension.

It is also possible to electronically file a wide range of documents on Companies House.

We have a dedicated Company secretarial service who would be happy to answer any questions on this relaxation and on Companies House practice.

This information is part of a series of Harbottle & Lewis Business Law Updates, focusing on legal and business operational issues arising in the current COVID-19 crisis. 

If you have any queries on their content, please contact businesslawupdate@harbottle.com.

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