Having first embraced eSignatures to solve the problem of signing documents during lockdown, I can now see a more general application. Using eSignatures can massively speed up the process of having an idea, approving it and crucially, getting the relevant decision makers the documents to implement. My observations below.
The challenges of signing pension deeds
We are all used to executing legal documents physically. Paper engrossments are printed and bound, everyone sits around a table and the authorised persons sign on the dotted line. The lawyers then take the signed documents and create certified copies for everyone. This is tried and tested and gives the comfort of a physical act and product to show the intention to be legally bound.
However this process can be difficult for pension scheme trustees and sponsors. Often their documents have to be effected by deed and time is of the essence. Trustees may only meet quarterly and are usually scattered across the country (or the globe). Physically getting everyone together, particularly outside the usual meeting cycle, is often easier said than done.
The pandemic has made things even harder, but the problem has been around for years. Various, virtual methods of signing have developed to smooth the process. Now we often execute documents in counterpart (typically by emailing documents to each party to print, sign and return a scan with originals to follow). Whilst helpful, it doesn’t fix everything: you still need a travelling physical document and if you have two signatories signing on behalf of a single entity (like when companies execute deeds by two officers) you probably also need them to sign the same physical paper copy for the deed to be valid.
As we all continue to embrace home-working, how we operate and enter into contracts has had to change. The emergence of various platforms to facilitate the e-execution of legal documentation therefore solves a particularly pressing problem during these times of remote working, but also offers an efficient way to streamline pension scheme governance processes.
Different types of eSignature are available, which range from simple tick boxes on websites, through to affixing a jpeg of a signature and on to advanced digital signatures which have been encrypted and verified by trusted third parties. Where an eSigning platform is used, instead of a physical ‘wet-ink’ signed document as proof of the bargain, the electronic document itself is the original and does not need a physical form. Anything which is printed is a copy of the original. This solves another age-old problem of tracking down original copies of documents.
Due to lingering concerns about the legal validity of documents being executed wholly electronically, in 2019 the Law Commission looked at whether the existing legislative framework was sufficiently flexible to allow for eSignatures. In its report (summarised here), the Commission concluded that yes, it worked in England and Wales for all types of documents and deeds.
You still have to look out for any restrictions in or relating to the documents themselves (e.g. certain formalities for deeds or documents relating to interests in land) or any signing protocols operated by the signatories. Apart from that, there is no reason in principle why various forms of electronic signature would not be acceptable – this could even include names typed at the bottom of an email, ticking a box on a website or even the signatory providing a description of themselves in an email. In fact, the Law Commission noted that the courts had accepted wet-ink signing with an ‘X’ or as ‘Your loving mother’ as a valid signature and there was no reason to doubt that a similar description by email would not be recognised.
Governance implications: Sign of the times?
Clearly, given the importance of many pensions documents and the potential liabilities if things go wrong, you would usually expect some formality to be required and that remains best practice. This is particularly so when it comes to acts which often have to be by deed, such as rule amendments or trustee appointments but is also relevant for day-to-day business such as investment instructions.
One remaining area of practical difficulty is that where individual trustees sign deeds, you still need a witness to be physically present when the signatory signs. That applies to eSignatures as well. You can’t just affix your eSignature and then forward on to the witness. One solution would be to change the law to permit video witnessing, but for now, the Government intends to only allow it for wills, and even then only on a temporary basis. For now you still need the witness to be present for a pension scheme deed.
However, there is no doubt that embracing the technology to allow eSignatures can assist trustees in acting validly, securely and more efficiently.
Some practical tips to check if eSigning could work for your scheme include:
- Check terms of governing documents (trust deed, articles of association, internal governance protocols) to ensure there are no restrictions on eSigning.
- Check supply contracts and investment management agreements – can notices or instructions be given electronically?
- Consider if overseas counterparties will recognise eSignatures.
- Consider incorporating your trustee as a company to avoid the need to get all trustees to sign and have physical witnesses (you can see an overview of pros and cons of trustee incorporation here ).
 Mainly the Electronic Communications Act 2000 and the Electronic Identification and Trust Services for Electronic Transactions Regulation 2016 for documents governed by English law and entities incorporated in England and Wales as supplemented by the eIDAS Regulation (Regulation (EU) No. 910/2014 for EU-based parties.