Covid-19: Closing transactions by electronic means in Jersey
19 March 2020
Given the travel restrictions that are now in place with Covid-19 and the number of people working from home or self-isolating, it is sensible to consider how transactions can be completed remotely.
Virtual signings are not new. There are established market practices which enable signatories to sign, scan and email documents for a closing rather than collecting wet-ink signatures in a single room. These practices will no doubt continue during the disruptions caused by the Covid-19 pandemic.
However, there are also other steps that can be taken by companies to effectively manage closings in these difficult times. We set out below our thoughts as to how companies can take practical steps to overcome the difficulties caused by Covid-19.
Board meetings by telephone or other electronic means (such as video conferencing)
The constitution of a modern Jersey company will usually provide that board meetings may be held by telephone or other electronic means.
If meetings are held by telephone or other electronic means, any tax implications should be considered.
As regards economic substance, the Jersey Comptroller of Revenue has recently given reassurances to companies facing the challenges of the pandemic. Please see our separate news item on this here.
The constitution of a company will always need to be checked. For example, it may be a requirement that a majority of those attending a meeting (either in person or by electronic means) have to be physically present in Jersey.
If meetings by telephone or other electronic means are not permitted by a company's constitution, it would be sensible to amend the constitution (if possible) to permit such meetings. Alternatively, there may be other ways to mitigate the challenges of physical meetings (as outlined below).
Written resolutions of directors
The constitution of a modern company will usually allow the directors of a company to pass written resolutions.
If written resolutions are permitted, then the need for any physical or other meeting can be avoided entirely.
Again, any tax implications arising from the use of written resolutions should be considered.
Additional or alternate directors
A further step that could be taken is to appoint additional directors to the board. This may be a prudent measure to ensure that quorum requirements can be achieved.
In addition, the constitution of a modern Jersey company will usually provide that a director may appoint an alternate director. This may assist where a director is unable to travel or is self-isolating. The alternate can attend the relevant board meeting instead.
The appointment of a corporate body as a director or alternate director may also be helpful. The corporate body can participate in meetings by an individual who is authorised to represent the corporate body. In practice, corporate directors tend to have a standing list of authorised persons and this should help to ensure that there is always an individual available on any given day.
In order to prevent a physical meeting of shareholders (and subject to the constitution of the company):
- shareholders may hold meetings by telephone or other electronic means; and
- shareholders may pass written resolutions.
If a physical meeting remains necessary, a shareholder can appoint a proxy or corporate representative to attend the meeting.
General review of a company's constitution
It would be prudent to conduct a general review of a company's constitution. There may be amendments that can be made to promote flexible arrangements (such as dispensing with any requirement to use a seal and taking full advantage of electronic notices).
Powers of attorney
If a signatory cannot attend a closing meeting, it may be possible for the signatory to appoint an attorney to execute the relevant document on the signatory's behalf. This may help to facilitate completions.
Signing contracts electronically
As a general rule, it is possible for a Jersey company to sign a contract using electronic signatures.
In addition, the Electronic Communications (Jersey) Law 2000 (the "EComms Law") confirms that a contract may be formed by means of electronic communications.
Statute requires a signature
A statute may require a document to be signed.
Under the EComms Law, an electronic signature will satisfy any requirement of a statute for a wet-ink signature provided that the method used (a) identifies the signatory and (b) indicates the approval of the signatory. This condition will be achieved with most software products used in the market for electronic signatures (such as DocuSign). It would also be achieved if the signatory circulates the electronic signature directly to counterparties by email.
However, there are certain documents which should not be signed electronically. These include documents that need to be given to a Jersey court such as a power of attorney relating to land and documents used to create a Jersey hypothec (being a mortgage over land).
These are clearly challenging times. There are a number of steps that can be taken to overcome the practical difficulties of Covid-19. Bedell Cristin can advise you on the effective management of your transactions.