An Introduction to e-Signatures

In the past few years, remote working, online meetings and video conferences have become more widely accepted.With this trend, the signing of documents has also increasingly moved to electronic ways.

In this article we look into e-signatures and digital signatures, their position under Hong Kong law and practical considerations.?

What is an e-signature?

An e-signature is short for “electronic signature”. It includes any letters, characters, numbers or other symbols in digital form associated with an electronic record for the purpose of authenticating said record.

The difference between e-signatures and digital signatures

Electronic signature is a broad term encompassing any electronic process that indicates acceptance or authentication of a record.

A digital signature refers to a specific type of e-signature, one that is universally accepted as the highest security level of electronic signatures.

A digital signature is like an electronic fingerprint as it is unique to you. It uses an advanced mathematical algorithm to generate a coded message associated with you as the person who signed the document. It guarantees the contents of a record are not altered in transit and prevents impersonation and tampering in digital communications.

There are multiple digital signature solution providers in the market, such as DocuSign and Adobe Sign.

E-signatures in Hong Kong

The legislation which oversees the regulation of e-signatures in Hong Kong is the Electronic Transactions Ordinance (Cap. 553) (“ETO”).

The ETO recognises that electronic records have a legal effect in Hong Kong for law purposes.

Furthermore, it acknowledges some of the multiple signature forms used in the private sector, as well as official electronic communication with the government.

Requirements for validity

The ETO sets out that e-signatures not involving any government entity will only be deemed valid if:

• The e-signature is attached to, or logically associated with the electronic record to indicate authenticity and approval.
• The signatory uses a reliable and appropriate method to communicate the information for which the signature is required.
• The receiving party must consent to using and receiving e-signatures.

If the contract involves any government entity, it is required that the digital signature is supported by a recognised digital certificate issued by a recognised Certification Authority (the?Hongkong Post?or?Digi-Sign).

Where to use

E-signatures are recognised for most contracts under Hong Kong law, here are some examples.

Simple contracts can be signed with e-signatures, provided they are not excluded from the ETO and there are no specific restrictions or requirements for a particular contract.

Subject to the Articles of Association of a company, board minutes and written resolutions signed with e-signatures will generally be accepted. The Companies Ordinance of Hong Kong specifically provides for company records to be kept electronically.

The statutory framework allows shareholders’ resolutions to be circulated and returned in electronic form.

Limitations

Certain contracts and documents under Schedule 1 of the ETO require handwritten “wet-ink” signatures and cannot be stored electronically.

The following documents are only valid with a traditional wet-ink signature in Hong Kong (Schedule 1, ETO):

1. Testamentary documents, including wills and codicils
2. Trusts
3. Powers of Attorney
4. Documents that are required to be stamped or endorsed under the Stamp Duty Ordinance (such as a lease, sale of property, sale of stock)
5. Government conditions of grant and Government leases
6. Documents concerning land and property transactions
7. Estate agency agreements between an estate agent and its client
8. Negotiable instruments
9. Court orders or judgments
10. Warrants issued by a court or magistrate
11. Oaths and affidavits
12. Statutory declarations
13. Bills of exchange (within Bills of Exchange Ordinance (Cap. 19))

Practical considerations

There are some practical issues to consider before using e-signatures for important legal documents:

• Do any restrictions apply to the document??Is it permitted under the ETO to be signed electronically? Also consider any other circumstance that may impact the use of e-signatures, such as registration/filing requirements and the counterparty’s requirements.
• Consider whether other jurisdictions involved place less evidentiary credibility to electronic records. In Hong Kong electronically signed records are generally valid and can be used as evidence. However, in some jurisdictions they may carry less evidential weight in a court than a traditional hard copy.
• Identity authentication and agreement to terms:?Both parties should accept that the signatures adequately identify the signatory, and that it is clear for the signatory what they are signing for.
• Security:?The signatories should ensure their e-signature systems are secure and reliable. Ideally, a system that uses public key or private key technology is being employed.
• Agree on procedures in advance.?It should be agreed on which e-signing system will be used, and which party will coordinate the signing and issue invitations.
• After signing:?the steps after signing the document should be considered, such as keeping a printed or soft copy version of the document.

How HKWJ can help

We can guide you in finding and using the appropriate e-signature solution for your company, as well as provide legal support in case of any disputes.

In cases where it is not possible to proceed with an e-signature, though you can’t make it in person, we assist in?notarisation, apostille and legalisation?of documents.

Alternatively, a?power of attorney?can make life easier, as the appointed agent may conduct business or conclude other legal activities on behalf of the principal.

The HKWJ Group is a one-stop holistic service provider and advisor to help your business grow. Within the Group, HKWJ Tax Law assists with financial administration, such as payroll, bookkeeping and accounting, as well as tax and legal matters. At Triple Eight Ltd, we provide a wide range of professional and corporate services, such as company secretarial services, bank account opening and company incorporation.