Birmingham Law Society Column - July
Wednesday, 1st July 2009
BLS Column - July
By Andrew Stilton, chairman of Birmingham Law Society’s Company Law Committee
It’s the call every commercial lawyer dreads and which invariably comes the Friday before Christmas: the transaction which fell through in the summer is back on and the world will come to an end if it is not completed by 31 December. There have been fundamental changes to the terms and the agreement you drafted in May needs to be re-written.
“By the way,” purrs the caller. “I‘m off skiing tonight. Can you scan the signature page from the draft agreement and send it over to me so I can sign it and scan it back to you, before you add it to the final version?”
With the advent of fax and email, it has become common to sign in advance and attach the signature pages to the final version of the document, overcoming the absence of signatories.
Doubt has recently been cast on this practice due to the High Court decision in the case of a tax-planning scheme that required the execution of documents in a particular order.
HM Revenue & Customs challenged the scheme, arguing the documents had not been executed validly because incomplete drafts had been signed, and the signature pages transferred to the final versions at a later date.
There were significant differences between the signed drafts and the final versions and there was no evidence the signatories had authorised the changes.
But even if they had, the documents still wouldn’t have been legally effective because they were executed as deed, which requires the signature to form part of the same physical document as the deed. The court decided that could not have been the case if the final document was not in existence when the signature took place.
Physical signing meetings, which take up time and incur additional legal fees, have now made an unexpected comeback.
The Law Society has produced some helpful guidelines for ‘virtual’ signings and completions, which can be much more straightforward than signing meetings.
Where documents are to be executed as deeds, any practice of signing blank signature pages should be avoided.
The Law Society’s guidance suggests that, before signing/completion, the lawyers should agree the practical arrangements before faxing or emailing final execution documents to all parties, who then print and sign the signature page only.
Each party should return a single fax or email containing the final version of the document, and a faxed or PDF copy of the signed signature page.
Where the document is not a deed, the formalities need not be so strict. A party who faxes or emails a signature page to the other parties should, however, make it clear that he is giving authority to attach it to the final version of the agreement.
One further word of warning: resist the temptation to amend documents to avoid embarrassment where a mistake is noticed on a signed document. It is tempting to replace the incorrect page but, particularly with deeds, those who do run the risk of invalidating the entire document.
