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Legal basis for the validity of digital signatures in Europe

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The eIDAS Regulation, tackling the electronic signature validity, is directly applicable in all European Union member states. 

The eIDAS Regulation

The eIDAS Regulation defines three types of electronic signatures:

  • Standard Electronic Signature (SES): Ensures the integrity of the document by embedding a certificate that proves the time of signing and that it hasn’t been changed since. It can be used for documents without formal requirements. Because it doesn’t need a strong verification of the signer’s identity, it is very fast and frictionless. DocuSign, for example, offers the standard electronic signing.
  • Advanced Electronic Signature (AES): Provides unique identifying information that links the embedded certificate to its signatory, e.g. by verifying a passport image once. It provides higher legal security and is therefore ideal for more important contracts.
  • Qualified Electronic Signature (QES): Provides the same legal validity as a handwritten signature, i.e. can be used for anything. It needs a strong authentication of the signatory, e.g. by a short video identification call during which the passport and person are verified.

If you want to read more about the legal basis of digital signatures, you can do so here.

Switzerland

Switzerland is not an EU member state, however, under Swiss law, the requirements for a valid document resemble the EU requirements. 

Swiss law distinguishes between two types of form requirements in relation to signatures. These requirements can either call for an obligatory handwritten signature or allow digital signatures.

There are two possible reasons when a handwritten signature would be required:

  1. The first reason is related to the type of document (for example a capital increase vs NDA). Some documents have specific form requirements and one of the requirements can be a handwritten signature. We list requirements for signatures of equity-related documents below.
  2. The second reason is if the document specifically states that a handwritten signature is required. 

Even if the law or the document calls for a handwritten signature, a QES (qualified electronic signature) would be sufficient, except if it’s explicitly excluded.

The documents that don’t fit in these two categories, do not require a handwritten signature, meaning that SES or AES can be used. However, to rule out any remaining uncertainty it’s still best to clarify the method of signing directly in the relevant agreement. That way, you can define whether SES or AES is required.

About the signature provider: Ledgy integrates Skribble for AES and QES. Skribble's service provider for QES is Swisscom, who is on the official list of accredited providers in Switzerland. (Read more here)

Examples of where the standard or advanced electronic signature is appropriate to use:

  • PSOP grants
  • ESOP grants
  • (Convertible) Loan agreements
  • Shareholders’ agreements
  • Investment and subscription agreements
  • Share purchase agreements (except the assignment of shares)
  • Term sheets
  • Regular employment agreements (except with regard to specific areas of the employment relationship, such as intellectual property rights in employee creations or non-competition clauses)
  • NDA, privacy notices 
  • Amendments to the aforementioned documents

Examples of where the qualified electronic signature is appropriate to use:

  • Subscription form*
  • Application for the commercial register
  • Power of attorney (POA)**
  • Capital increase report
  • Transfer of existing non-certificated shares by way of assignment, e.g. as part of a secondary deal

*Many local notaries accept a PDF copy with a hand-written signature in case the subscription form includes authorization of a person who will be personally present at the notary's meeting regarding the capital increase and this person signs the executed PDF copy.

**Many local notaries are flexible when it comes to powers of attorney that are not presented in original hand-written form. It is the responsibility of a board member to determine how many votes / how much share capital are/is present at the relevant shareholders’ meeting. Therefore, many local notaries do not verify the powers of attorney, but it is the responsibility of the board of directors to ensure that the correct statements are made.

Examples where electronic signatures are not allowed and statutory notarization requirements apply:

  • Resolution of the shareholders’ meeting in connection with an amendment of the articles of incorporation (e.g. capital increase, change of company’s name or relocation)
  • Resolution of the board of directors in connection with an amendment of the articles of incorporation (e.g. implementation of a capital increase or subsequent payments)

Germany

Examples of where the Standard or Advanced Electronic Signature is appropriate to use:

  • Work contract (but see limitations below)
  • NDA, privacy notice
  • VSOP grant
  • ESOP grant
  • Shareholders’ agreement
  • Term sheet
  • (Convertible) loan agreement
  • Power of Attorney (POA)
  • Board meeting minutes

A remark about work contracts (including PSOP/VSOP compensation)

The general work contract part is binding in any case, digital or paper, but the time-limit or no-competition part would not be valid in electronic form. This is a specific limitation of the German employment regulation.

There is a law of proof for employment contracts in Germany, which requires a wet-ink copy to be handed to the employee within one month of signing. However, the contract is valid anyway, so there’s only the negligible risk of a damage suit by the employee, who could argue that he/she didn’t know about the deadlines in the contract. Most companies are willing to take this risk.

Where the Qualified Electronic Signature is appropriate to use:

  • QES: Temporary agency work agreement
  • QES: Subscription agreement

Where electronic signatures are usually not appropriate:

  • HR: termination notice, limited-duration contract
  • Articles of incorporation of a company with limited liability
  • Assignment of shares of a company with limited liability