Now that South Africa is under lockdown for the next 21 days, as part of an organisation’s business continuity efforts, businesses will, to the extent possible, continue to run remotely. Two common legal issues that arise from remote working are:
- the electronic signing of agreements and instructions; and
- whether meetings can take place using technological means.
In this article, we touch on both issues.
Section 11 of the Electronic Communications and Transactions Act, 2002 (“ECTA“) provides for the legal recognition of data messages and states that “information is not without legal force and effect merely on the grounds that it is wholly or partly in the form of a data message”. Section 12 of ECTA further provides that “where it required that a document must be in writing that requirement is met if the document is in form of a data message, and accessible in a manner usable for subsequent reference.” This means that a document in an electronic format has legal force and may be binding.
In the event that a document needs to be signed, what is the legal force of an electronic signature?
Generally, a signature is a mark or sign made by a person on a document to indicate approval, acceptance, or obligation. It has the purpose of binding a person signing to the provisions contained in the document. For a signature to be valid in terms of South African law, three requirements must be met:
- the name or mark of the person signing must appear on the document;
- the person signing must have signed it; and
- the person signing must have intended to sign the document.
Section 1 of ECTA defines a electronic signature as “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature”.
Section 13 of ECTA further expands on the use of electronic signatures and states that an electronic signature is not without legal force and effect merely on the grounds that it is in electronic form. Where an electronic signature is required by the parties to an electronic transaction and the parties have not agreed on the type of electronic signature to be used, that requirement is met in relation to a data message if:
“(a) a method is used to identify the person and to indicate the person’s approval of the information communicated; and
(b) having regard to all the relevant circumstances at the time the method was used, the method was as reliable as was appropriate for the purposes for which the information was communicated”.
In the case of Spring Forest Trading v Wilberry, the Supreme Court of Appeal considered the question as to whether the name of a person at the end of an email can constitute an electronic signature for the purposes of ECTA. The court held that “as so long as the ‘data’ in an email is intended by the user to serve as a signature and is logically connected with other data in the email the requirement for an electronic signature is satisfied”.
Essentially, for a signature to be recognised as a valid electronic signature, it must be shown that there is a relationship between the sender’s identity and a person’s intent to sign the document. Where a party to a communication alleges that an email was sent fraudulently, in the recent judgment of Global & Local Investments Advisors (Pty) Ltd Appellant v Nickolaus Ludick Fouché, the Supreme Court of Appeal distinguished the facts of this case from the Spring Forest Trading decision and held that: “In the present case the emails in issue were in fact fraudulent. They were not written nor sent by the person they purported to originate from. They are fraudulent as they were written and dispatched by person or persons without the authority to do so. They are not binding…”
Important to note is that where the signature of a person is required by law and such law does not specify the type of signature, that requirement is only met if an advanced electronic signature is used. An advanced electronic signature which is defined as “an electronic signature which results from a process which has been accredited by the Authority as provided for in section 37”. To date, the South African Post Office and one other private body have been accredited by the Authority as such.
There are exceptions for certain types of agreements that may not be validly concluded electronically, such an agreement for the sale of immovable property, long-term leases of land exceeding 20 years, a will, and bills of exchange such as cheques.
Board meetings and shareholders’ meetings
The Companies Act, 2008 (the “Act”) allows board meetings and shareholder meetings to be conducted through electronic means unless the Act or Memorandum Of Incorporation provides otherwise.
Section 63 allows that a shareholders’ meeting can be conducted entirely by electronic communication; or one or more shareholders, or proxies for shareholders, may participate by electronic communication in all or part of a shareholders’ meeting that is to be held in person, as long as the electronic communication employed ordinarily enables all persons participating in that meeting to communicate concurrently with each other without an intermediary, and to participate reasonably effectively in the meeting.
If a company provides for participation in a meeting by electronic communication, the notice of that meeting must inform shareholders of the availability of that form of participation, and provide any necessary information to enable shareholders or their proxies to access the available medium or means of electronic communication. Access to the medium or means of electronic communication is at the expense of the shareholder or proxy, except to the extent that the company determines otherwise.
Section 73 of Act also provides that a meeting of the board may be conducted by electronic communication; or one or more directors may participate in a meeting by electronic communication, so long as the electronic communication facility employed ordinarily enables all persons participating in that meeting to communicate concurrently with each other without an intermediary, and to participate effectively in the meeting. With regard to a decision that could be voted on at a meeting of the board of that company, it may instead be adopted by written consent of a majority of the directors by electronic communication, provided that each director has received notice of the matter to be decided. A decision made in the manner contemplated in this section is of the same effect as if it had been approved by voting at a meeting.
For more information on electronic signatures, conducting meetings electronically or setting up internal policies to enable electronic approvals and contracting, please contact: Ridwaan Boda or Lucinda Botes.
Written by Ridwaan Boda, Technology, Media and Telecommunications, Director & Lucinda Botes, Corporate Commercial, Candidate Attorney; ENSafrica