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Given the current restrictions on social interaction put in place to combat the spread of COVID-19, working from home is becoming the new normal. As a result, it is not always easy to sign paper copies of documents while working from home, and businesses across the world are exploring the increased use of e-signatures. This e-bulletin considers the position of e-signatures under Hong Kong law and provides practical insights.
The major legislation regulating e-signatures in Hong Kong is the Electronic Transactions Ordinance (ETO).
For transactions not involving any government entity, e-signatures are valid and enforceable provided they comply with the requirements under the ETO. In particular:
There are no express requirements for the e-signature to be in a certain form or format. For example, parties to a transaction can use a stylus on a touchscreen devise to sign a document or adopt a bespoke e-signature online tool which assigns the parties’ secure login details and gives them access to the document to be signed.
If the contract involves any government entity, digital signatures supported by a recognised digital certificate issued by a recognised Certification Authority will be required.
Simple contracts: provided there are no specific restrictions or requirements for a particular contract and it is not excluded from the application of the ETO, simple contracts can be signed using e-signatures or digital signatures.
Deeds executed by Hong Kong-incorporated companies: It is not market practice in Hong Kong for deeds to be executed using e-signatures. Given the relative importance of deeds, parties will generally insist on wet ink signatures, although virtual signings where parties exchange PDF scans of the wet ink signatures are commonplace to avoid the need for parties to be physically present in the same place. For Hong Kong-incorporated companies, the Companies Ordinance permits a company to execute a deed by having it signed on behalf of the company by two directors or one director and the company secretary (or one director where it is a sole director company). In our view, whilst this has yet to be tested in the Hong Kong courts, these signatures could be in electronic form where the ETO requirements are complied with. However, whilst the position remains untested, a degree of uncertainty remains until case law develops or legislation is amended to confirm the position.
Minutes and resolutions: subject to the articles of association of a company, board minutes and written resolutions signed using e-signatures will generally be accepted. The Companies Ordinance of Hong Kong specifically provides for company records to be kept electronically. For written shareholders’ resolutions, the statutory framework permits resolutions to be circulated and returned in electronic form. In authenticating the electronic approval of a resolution, the identity of a relevant person (eg, an individual shareholder) can be confirmed in a manner specified by the company or, where not specified, by a statement of the person as to their identity where the company has no reason to doubt its truth.
The ETO sets out documents that are not suitable to be signed electronically, including powers of attorney, documents concerning land and property transactions, oaths and affidavits, statutory declarations, and testamentary documents such as wills.
Notably, the ETO excludes the application of e-signing to court proceedings in Hong Kong. Provisions permitting information or documents to be served, presented, retained or signed electronically do not apply to court or tribunal proceedings unless any rule provides otherwise. However, Hong Kong courts are moving a step closer to facilitating the electronic filing with the Court Proceedings (Electronic Technology) Bill under review (see our blog dated 23 January 2020 for more information).
E-signatures should also be avoided where any documents need to be registered or filed with a regulator that requires an original wet ink signature or where the document needs to be notarized.
Under Hong Kong law, an electronic record shall not be denied admissibility in evidence for any legal proceeding on the sole ground that it is an electronic record. In other words, e-signed documents can be admissible as evidence provided that they comply with the rules of evidence.
Although e-signatures are generally binding in Hong Kong, their use is not without risk. There are issues to consider before using e-signatures for important legal documents. The following checklist will help you navigate these issues:
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