Are Signing Meetings Back?

27/05/2009

A recent case, R (on the Application of Mercury Tax Group Limited and another) v. HMRC (the "Mercury Tax Case"), has brought into focus for lawyers the requirement that documents be executed correctly - indeed the decision has caused some lawyers to move back to the traditional "signing meeting" and away from recent trends to exchange and/or complete transactions electronically.

In the corporate world, until the advent of e-mail there would be a signing meeting i.e. a meeting where all the relevant parties would gather in one room to execute the documents at the same time. This was often followed by much handshaking, back slapping and champagne... As times changed, however, and the speed at which communications increased, coupled with the fact that people were being put under more and more time pressure in their own working environments, signing meetings became rarer and more often than not lawyers would simply gather electronically sent signature pages and, once in possession of all of the required pages, agree to exchange or complete. The Mercury Tax case caused many to reconsider this approach.

The Mercury Tax Case

The decision in the Mercury Tax Case was limited to the particular facts of the case. The essence of the decision was that documents which were purported to have been executed as deeds had not been executed properly. The decision was based on the fact that signatures to the purported deed had been collected in advance of completion and were ultimately collected on drafts of the deed which were not yet final. In other words, the document was still being drafted and negotiated and the signing parties executed, for example, version 7 of the document but the final purported version was version 9. The signature pages were then inserted into the final agreed draft. This decision, together with the judge's obiter comments in the case, initially led to concerns in the legal community as to how "virtual signings" could happen and even led some to revert to arranging physical signing and completion meetings where all parties gathered in the same place - a costly and time consuming way in which to finalise agreements.

Law Society Guidelines

Given this state of affairs the Law Society recently published guidance which provides a range of options for parties when they are required to execute documents (the "Guidelines"). Adherence to the guidance should result in a document being executed properly without the need for a physical signing meeting - meaning a document will be validly executed, comply with established case law on the subject of proper execution of documents and not fall foul of the pitfall established in the Mercury Tax Case.

The Guidelines can be found at http://www.citysolicitors.org.uk/FileServer.aspx?oID=571&lID=0. The Guidelines offer three options as methods of conducting a virtual signing - the central focus in each option is that parties who are signatories to a document should actually see the final agreed version of the document. The different options relate to different types of contracts (deeds, guarantees, simple contracts etc.) and vary slightly but it is imperative that the signature versions are seen by signatories.

Do You Need a Signing Meeting?

The short answer to this is that it depends on the individual circumstances of the deal and the availability of signatories, but generally a physical signing meeting can be avoided. The reaction of some lawyers following the decision in the Mercury Tax Case was probably excessive. The Guidelines lay out what should have been good practice before the Mercury Tax Case and should not substantively change the way virtual signings are conducted, but it is imperative that the lawyers and parties involved agree how virtual signings are to be conducted early in a negotiation process to ensure that the issues which arose in the Mercury Tax Case are not repeated.

Back to news archive