Ship finance closings during the coronavirus crisis
In the light of the ongoing COVID-19 pandemic, many businesses across the world are asking their staff to work from home. This brings with it certain challenges for executing and delivering documents. This is a guide on the English law rules surrounding the execution and delivery of documents, as well as certain workarounds that are available to facilitate remote closings.
We also look at the approaches of various public bodies to the current situation.
Whilst practices and rules vary by jurisdiction, remote closings are not new.
Documents signed by way of a virtual closing and delivered electronically will often suffice in place of a traditional wet ink signature and a physical exchange. It is good practice, however, to agree this method of execution with all parties to the transaction beforehand and, if relevant, consult with local counsel in each party's jurisdiction. In England, under the Mercury Tax protocol, it will be deemed that a party has validly entered into a document if it sends, via email, (1) an agreed execution version of that document together with (2) the signed signature page to the remaining parties and an undertaking to deliver "wet ink" signatures later. Accordingly, any request to complete on the basis of original documents only may be queried.
Certain documents (such as powers of attorney, etc.) may need to be executed as deeds, which, under English law, have additional signing formalities. Although they can be signed remotely and delivered in accordance with the Mercury Tax protocol (but with additional formalities regarding exchange, release and delivery), they will often need to be witnessed (depending on the signature requirements of that party and local law).
Execution of deeds; witnessing
Witnessing signatures remotely (e.g. over video conferencing technology) is not permitted under English law as the witness must be physically present when the signatory signs the document. Witnessing documents in the home working environment can present challenges. Saying that, family members (or cohabitants or neighbours), provided that they are over 18 with full mental capacity, can witness documents, save for in limited circumstances, for instance, where a personal guarantor is signing a guarantee (where it is not acceptable for the witness to be the personal guarantor's spouse) or where the witness is a party to or has a beneficial interest in the document being witnessed.
In the first instance, however, one should consider whether a party needs to execute a document as a deed.
For example, a recipient of a security deed (e.g. a bank taking security for its loan by way of a charge over the borrower's assets) rarely has obligations under it other than to release it (which is mostly a restatement of the law) and therefore may need not to execute it as a deed. Security documents are often executed as deeds to benefit from the statutory power of sale and in order to include powers of attorney. It may, in some circumstances, be possible to amend the security so that it does not contain these provisions, and accordingly may not need to be executed as a deed.
Where the party to the deed is not an English company, the deed will need to be executed in accordance with the execution formalities in that company's jurisdiction of incorporation which may mean that two signatures are required rather than a signature and a witness.
Registration requirements; public authorities
Charges created by English companies need to be registered at Companies House within 21 days of the date of creation and there are similar regimes in other jurisdictions.
We routinely register security at Companies House using their online service and continue to do this. The 21 day time limit for registration of charges is set out in the Companies Act 2006 and so Companies House would not be able to relax this without a change to the legislation. At present, there is no significant interruption to the service and Companies House are still handling registrations of charges as normal although response times may be longer. In addition, Companies House are only producing hard copy versions of certain documents (which takes longer), such as certificates of goodstanding. Charge registration certificates are still issued electronically and registrations can be checked in real time via their website.
Flag authorities often require original, wet ink documents to register ships and mortgages over them. We note that various flag states have taken different approaches, with a number of them accepting electronic copy documents (sometimes with originals to follow). We have been able to successfully complete transactions involving numerous flag states during the coronavirus outbreak. The UK registry will normally complete vessel and mortgage registrations and deletions for vessels on the main commercial register on the basis of pdf copies.
Most notaries are still able to offer notarisation services.
The Foreign & Commonwealth Office (FCO) is offering limited legalisation and Apostille services from their Milton Keynes office but the service may be slower and more expensive (particularly if the notary has to travel to Milton Keynes in person). The FCO are also prioritising matters relating to healthcare and emergency travel.
The FCO are also offering a signature checking service as an alternative to obtaining an Apostille or legalisation, but whether this is a suitable alternative will depend on the third party or public body who requires the Apostille or legalisation.
Various consulates, who offer Apostille and legalisation services, have taken different stances with many remaining closed in London for the time being. As some are offering limited services, however, it is often worth calling them to establish their exact position.
For more information, please contact;
T +44 (0)20 7264 8413
T +44 (0)20 7264 8544
T +44 (0)20 7264 8092