We mentioned execution of deeds and documents in Signed, Sealed, Delivered. The law relating to execution was changed as from 1 October 2009, thanks to Part 4 of the all-encompassing and terribly exciting Companies Act 2006 (of which I shall blog about in later posts). The provisions of the Companies Act 1985 relating to the execution of documents were sadly repealed (and I say sadly with genuine sadness because I spent a good six years learning The Companies Act 1985), in accordance with The Companies Act 2006 (Commencement No. 8, Transitional Provisions and Savings) Order 2008 (SI 2008/2860).
An agreement is not worth the paper it’s written on if it is not enforceable. Whether or not an agreement is enforceable depends on many things factors such as:-
1. Is the agreement in the proper form?
2. Do the contracting parties have capacity to enter into the agreement?
3. Who is authorised to contract on behalf of the parties?
4. Have the proper execution formalities been complied with?
To confuse you more, the law in these areas is fragmented and about as clear as mud. Oh good, I hear you say.
As mentioned above, the law of execution changed as a result of the implementation of section 44 of the Companies Act 2006 on 6 April 2008. Section 44 totally restated the now repealed section 36A of the Companies Act 1985. For the first time, it stated that a company may execute a document under the law of England and Wales or Northern Ireland, by signature of a single director if that signature is witnessed and attested. From 6 April 2008, most subsections of section 36A of the Companies Act 1985 were repealed in respect of documents executed on or after that date (Part 1, Schedule 2, The Companies Act 2006 (Commencement No. 5, Transitional Provisions and Savings) Order 2007 (2007/3495)). If you want to know more about the law on execution by companies then I’ll tell you in the next post which I’ll give an exciting title too, something like Companies Act Execution Rules. WooHoo!
Sections 43 and 45 to 50 of the Companies Act 2006 largely restate the execution provisions of the Companies Act 1985 with some amendments but more of that anon.
Signed? In Signed, Sealed, Delivered, we raised the question about when you need a written contract. In this post, we’ll consider the answer.
The basics are that contracts are made in one of three ways:-firstly, oral; secondly, written (which you may hear referred to as "under hand" i.e. signed using a pen!; and thirdly, deeds. Oral and written contracts under hand are said to be in simple form and deeds are executed very grandly in what is solemn form.
The main reason for having a simple written contract rather than an oral contract is to record the terms which can then be used for evidential purposes if necessary; I have often spent many sleepless nights working to produce a beautiful contract only to be told by my client that, once executed, the contracts are put in a drawer and forgotten about. It is only when things go wrong that the drawer will be yanked open and it will be necessary to check the terms of the contract and that is the time when you will be grateful that you have recorded the terms of the contract clearly in writing. There are situations where a written contract may be required by law or because of registration requirements. Situations like:-
Ø The assignment of the benefit of a contract - The usual way of assigning the benefit of contractual rights is under section 136 of the Law of Property Act 1925 (a statutory assignment). By that section, a legal (or statutory) assignment can be effected provided that the assignment is in writing, is unconditional, is of the entire benefit and written notice is given to the other contracting party. If any of these conditions is missing, the assignment cannot be a legal assignment but may still stand as a perfectly good equitable assignment.
The only significant difference between a legal and an equitable assignment is that an equitable assignee often cannot bring an action in its own name against the third party contractor, but must fall back on the rules governing equitable assignments and join the assignor as party to the action.
Ø A contract for the sale of land (as opposed to the actual conveyance which must be by deed) - a contract for the sale or other disposition of an interest in land must be in writing, signed by or on behalf of each party and must incorporate all the terms expressly agreed by the parties (section 2, Law of Property (Miscellaneous Provisions) Act 1989). In addition, an equitable charge or mortgage of a legal estate in land must be in writing and comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. It is no longer possible to create equitable mortgages by deposit of title deeds (section 2, Law of Property (Miscellaneous Provisions) Act 1989 and United Bank of Kuwait plc v Sahib [1997] Ch 107). A mortgage of an equitable interest in land, which is necessarily an equitable mortgage, must be in writing (section 53(1)(c), Law of Property Act 1925. In practice it will often be by deed.
And also an assent of a legal interest in land must be in writing (section 36(4), Administration of Estates Act 1925).
Ø A transfer of shares - the contract for the sale of shares does not need to be in writing but you will find that most companies' articles of association and, in any event, section 770 of the Companies Act 2006, require a written transfer of shares signed by or on behalf of the transferor to be lodged with the company before the new shareholder is registered as owning the shares. This affects the legal rather than the beneficial title to the shares. The only exception to this, as far as private and unlisted public companies are concerned, is share warrants to bearer (section 779, Companies Act 2006). The other exception is for listed companies whose shares are admitted to CREST where the shareholder holds the shares in "uncertificated form". In this case, share transfers can be effected electronically and do not require written transfers (sections 783, 784(3), 785 and 788 Companies Act 2006 and The Uncertificated Securities Regulations 2001 (SI 2001/3755)) (as amended by The Companies Act 2006 (Consequential Amendments) (Uncertificated Securities) Order 2009) (SI 2009/1889))..
Ø A transfer of most intellectual property rights - Assignments of copyright, patents, registered designs and design rights must all be in writing. An assignment of copyright or a design right must be signed by or on behalf of the assignor to be effective (sections 90(3) and 222(3), Copyright Designs and Patents Act 1988). Before 1 January 2005, an assignment of a patent or patent application was void unless it was in writing and signed by or on behalf of both of the parties to the transaction (section 30(6), Patents Act 1977). However, the need for patent assignments to be signed by assignees (in addition to assignors) was removed by the Regulatory Reform (Patents) Order 2004 (SI 2004/2357) as of 1 January 2005. Under the Registered Design Act 1949, as revised with effect from 1 October 2006, an owner may assign a registered design by a written assignment which must be signed by, or on behalf of, the assignor (section 15B, Registered Designs Act 1949). To be effective, an assignment of a registered trade mark must be in writing and signed by or on behalf of the assignor (section 24(3), Trade Marks Act 1994).
Ø Guarantees - A guarantee (but not an indemnity) is not enforceable unless it is in writing or there is a memorandum or note of the agreement signed by the guarantor or at its direction (section 4, Statute of Frauds 1677).
Metha v J Pereira Fernandes SA [2006] EWHC 813 (Ch), the High Court held that for the purposes of section 4 of the Statute of Frauds 1677, an e-mail (which contained the essential terms of an offer of a personal guarantee which had been accepted orally and unconditionally by the other party) constituted a sufficient note or memorandum of the agreement, but the presence of an automatically inserted e-mail address at the top of the e-mail did not constitute a signature by, or on behalf of, the would-be signatory as it was not inserted into the document in order to give, or with the intention of giving, authenticity to it.
You will tend to find that a guarantee is usually executed as a deed, rather than as a simple contract, to avoid any problems of consideration.
Payment of costs of leases - an agreement by one party to pay the legal costs of another party to a lease or agreement for lease has to be in writing, although it need not be in the lease or agreement for lease itself (section 1, Costs of Leases Act 1958). In practice, a lease (or agreement for lease) will expressly set out the position on costs. Heads of terms will usually cover the position on costs but it is not sufficient to make one party responsible for the other's costs in non-legally binding heads of terms. The "costs" referred to are the costs of the grant of the lease (or agreement for lease).
Financial collateral arrangements - The Financial Collateral Arrangements (No. 2) Regulations 2003 (www.practicallaw.com/T4700) (as amended by The Financial Collateral Arrangements (No. 2) Regulations 2003 (Amendment) Regulations 2009 (SI 2009/2462)) (FCA Regulations) change the formalities involved in taking and enforcing security over cash deposits and shares, where both the collateral-provider and the collateral-taker are corporate bodies, unincorporated firms, partnerships or bodies with legal personality. The FCA Regulations do not apply to individuals.
A financial collateral arrangement is an arrangement between two parties which involves the giving of security over cash or financial instruments (that is, broadly, shares, bonds or other tradable capital markets debt instruments). The arrangement may be either (i) a title transfer financial collateral arrangement. For example where shares are transferred to a counterparty with the intention that the shares or replacements for the shares will be transferred back at the end of the agreement; or (ii) a security financial collateral arrangement. For example charges, liens, mortgages and pledges.
In order for the FCA Regulations to apply, ownership, possession or control must be transferred to the collateral taker. This means that the FCA Regulations do not apply to collateral secured by a floating charge, unless the floating charge has crystallised and the requisite amount of possession or control is exercised by the collateral taker.
The only formality which may be required for a financial collateral arrangement to be perfected and enforceable is that the arrangement be evidenced in writing.
The following statutory provisions requiring the collateral provider's signature on the relevant security document do not apply to financial collateral arrangements security:
Section 4 of the Statute of Frauds 1677: no action on a third party's promise unless in writing and signed.
Section 53(1)(c) of the Law of Property Act 1925: disposition of equitable interest to be in writing and signed.
Section 136 of the Law of Property Act 1925: legal assignment of choses in action, to the extent that the assignment is required to be signed by the assignor or on the assignor's behalf. (In relation to security over a cash deposit, it should be noted that the disapplication of section 136 of the Law of Property Act 1925 only extends to the signature requirement. Notice should still be given to a third party bank in order to fix the collateral taker's priority under the rule in Dearle v Hall (1828) 3 Russ 1, [1824-34] All ER Rep 28.)
Regulation 4(1)-(3), FCA Regulations The requirement to register certain security interests at Companies House (under sections 860 and 874 of the Companies Act 2006) does not apply to financial collateral arrangements (Regulation 4(4), FCA Regulations).
So? When do you need a deed? The main difference between a deed and other forms of written contract is that some additional execution formality is required (beyond a simple signature) for the transaction to be enforceable. Two other important differences flow from the distinction:-
1. Deeds are generally enforceable despite any lack of consideration.
2. The limitation period for actions brought under a simple contract is six years from the date on which the cause of action accrued (section 5, Limitation Act 1980). The period is generally 12 years in the case of a deed - it is six years for claims for arrears of rent and arrears of interest under a mortgage (sections 8, 19 and 20, Limitation Act 1980).
The extended limitation period and enforceability despite lack of consideration technically apply to "specialties". Some argue that not all deeds are specialties but this view has been rejected by the Law Commission.
The Law Commission has proposed a reform of the law of limitation, and its proposals would remove the distinction between simple contracts and deeds.
The policy reasons for the distinction between deeds and other documents are seldom articulated but the Law Commission identified three purposes in its 1996 consultation paper on the execution of deeds and documents (1996 Consultation Paper).
Evidential Providing evidence that the maker did enter into the transaction, and so giving authenticity to other parties and bodies such as the courts and Land Registry.
Cautionary Requiring the maker of a deed to pause for thoughtand give due consideration to the transaction.
Labelling Making it apparent to third parties what kind of document it is, and what its effect is to be.
(Paragraph 2.18, 1996 Consultation Paper.)
When is a Deed Necessary? A deed is only necessary for a relatively small category of transactions. The most important of these are:-
a)
Land transfers - the transfer or creation of an interest in land (including a mortgage or charge) is void for the purpose of conveying or creating a legal estate unless made by deed (section 52, Law of Property Act 1925). This does not affect the validity of surrenders or other transfers that take effect by operation of law. Also, assents do not have to be executed as deeds (section 36
b) (4) Administration of Estates Act 1925).
Many types of transfers of registered land are required to be in prescribed form under the Land Registration Rules 2003 (as amended).
All leases must be created by deed if they are to take effect at law except leases which take effect in possession for a term not exceeding three years at the best rent reasonably obtainable without taking a fine (sections 52(2) and 54(2), Law of Property Act 1925).
c) Mortgages and charges - a legal mortgage or charge by way of legal mortgage over land can only be created by deed (sections 85, 86 and 87, Law of Property Act 1925).
Any mortgage or charge of land or other property (whether legal or equitable) must be by deed if the mortgagee or chargee is to have the statutory powers of sale, insurance, appointment of a receiver and forestry (section 101, Law of Property Act 1925).
d) Sales by mortgagees - a sale by a mortgagee or chargee under the statutory power of sale must be by deed if the sale is to overreach subsequent mortgages and charges (section 104, Law of Property Act 1925).
e)
Appointments of trustees - a document appointing a new trustee must be by deed if there is not a separate transfer of the trust property into the names of the new trustees (section 40, Trustee Act 1925 as amended by the Trusts of Land and Appointment of Trustees Act 1925).
Registration requirements, for example in relation to stocks and shares and land, must still be complied with to pass legal title to the new trustees.
e) Powers of attorney - The grant of a power of attorney must be executed as a deed by the donor of the power (section 1(1), Powers of Attorney Act 1971).
f) Gifts of tangible goods - A gift or voluntary assignment of tangible goods that is not accompanied by delivery of possession must be by deed (Irons v Smallpiece (1819) 2 B&E Ald 551 and Cochrane v Moore (1890) 25 QBD 57).
Releases and variations
At common law, a contract contained in a deed could only be varied or discharged by another contract contained in a deed (for example, Pinnel's case (1602) 5 Co Rep 117a and Cross v Sprigg [1849] 6 Hare 552 and Kaye v Waghorn [1809] 1 Taunt 428); but in equity such contracts could be varied or discharged by parol if there was consideration (Webb v Hewitt [1857] 3 K and J 438). The equitable rule now prevails (section 49, Senior Courts Act 1981, and Plymouth Corporation v Harvey [1971] 1 WLR 549).
The doctrine of promissory estoppel is also relevant and oral evidence (for example, of a course of conduct) is also permissible to show a variation of the terms of any deed (Mitas v Hyams [1951] 2 TLR 1215, City of Westminster Properties (1934) v Mudd [1959] Ch 129 and Plymouth Corporation v Harvey [1971] 1 WLR 549).
No consideration or extending the limitation period
There are also situations in which a party may insist on the use of a deed for a transaction because, for example, it is unclear whether valuable consideration is given (such as, a guarantee of an existing debt) or to have the benefit of the longer limitation period.
Execution formalities for deeds
A combination of common law rules and statute govern the formalities for the execution of deeds.
The face value requirement
The main requirement that applies to every deed is that it must make clear on its face that it is intended to be a deed (section 1(2)(a), Law of Property (Miscellaneous Provisions) Act 1989) - the "face value requirement". Standard wording on the face of a document will usually fulfil this requirement. For example, a document may start "This deed of indemnity" and end "Signed as a deed by..." or "This document is executed as a deed and is delivered and takes effect at the date written at the beginning of it."
In the past it had been unclear whether the mere presence of a seal without any mention of the word "deed" satisfied the face value requirement. Despite a case to the contrary (Johnsey Estates (1990) Limited v Newport Marketworld Limited and Others, 10 May 1996 (unreported, Judge Moseley QC)), the Law Commission had been of the opinion that the mere fact of affixing a seal to an instrument was not sufficient in itself to show the intention to create a deed. This view has now been embodied in section 1(2A) of the Law of Property (Miscellaneous Provisions) Act 1989 which clarifies that the face value requirement in section 1(2)(a) is not satisfied merely because an instrument is executed under seal. This means that the word "deed" should always be used to describe the document as a deed and the execution provision should be expressed to be executed or signed as a deed as appropriate (see
Deeds, contracts under seal and specialties).
Different execution formalities apply to different types of legal person. For specimen clauses and notes on formalities see:
There are also statutory presumptions that documents have been duly executed (section 44(5), Companies Act 2006 and section 74(1), Law of Property Act 1925) (see
Execution: presumption of due execution).
The final formality required for a deed to take effect is delivery (unlike a simple contract, which is effective on execution). Delivery, which is a common law requirement, is the critical factor as it fixes the date from which the party is bound and once delivered a deed is irrevocable (in the absence of an express right of revocation).
Delivery can be conditional (that is, an escrow (see below)) or unconditional. When a deed is delivered unconditionally, it will take immediate effect. This may have important timing consequences. For example:
In relation to land transactions, any required Land Transaction Return and Stamp Duty Land Tax must be submitted and paid within 30 days after the "effective date"; the effective date is generally completion which in relation to deeds means delivery (and dating) of the document (sections 76 and 119, Finance Act 2003).
A charge created by a company must be registered within 21 days after the date of creation of the charge (sections 860 and 870, Companies Act 2006) (although it is possible that "creation" could be construed as execution irrespective of the timing of delivery). (Note that section 860 of the Companies Act 2006 does not apply to a security financial collateral arrangement or any charge created or otherwise arising under a security financial collateral arrangement within the FCA Regulations.)
Transactions that trigger first registration must be sent for registration within two months of the transaction (sections 4 and 6, Land Registration Act 2002).
At common law, a deed is delivered when a party evinces an intention to be bound, even though it retains possession of the document (Xenos v Wickham (1867) LR 2 HL 296, at 312). It does not matter whether this intention is actually communicated to the other party, so long as it is shown by some sufficient act or words. Also at common law, where a corporation seals a deed, this may import delivery depending on the parties' intentions. An intention that delivery is not intended on sealing may be shown, for example, by the sealing having taken place in the course of negotiations that remain subject to contract.
There are statutory presumptions relating to the timing of delivery of deeds executed by UK companies. These can have important practical implications because once delivered, a deed is irrevocable. If, for example, a company executes a deed and sends it to its legal adviser to hand over at "completion", it will be irrevocable before completion if the date of delivery is presumed to be the date of execution (and there is nothing to rebut that presumption).
The Companies Act 2006 contains a rebuttable presumption relating to the timing of delivery of deeds executed by companies. It provides that a document executed as a deed by a company is presumed to be delivered as a deed on execution, unless a contrary intention is proved (section 46(2), Companies Act 2006).. This applies whether execution is under the common seal or in accordance with section 44(2) of the Companies Act 2006 (document signed by two authorised signatories or by a single director in the presence of a witness who attests the signature). (For documents executed before 6 April 2008, the rebuttable presumption only applied if execution was under the common seal or in accordance with the then section 36A(4) of the Companies Act 1985 (document signed by two directors or a director and company secretary (see
Standard clause, Execution formalities: Companies Act companies: pre-6 April 2008 (www.practicallaw.com/0-107-3892)).)
Section 74A of the Law of Property Act 1925 includes a rebuttable presumption for corporations aggregate analogous to that applicable to companies under section 46(2) of the Companies Act 2006.
The presumption is rebuttable and a number of steps can be taken to prove a contrary intention. For example:
The attestation clause in the deed might say "This deed is delivered on the date written at the start of this deed".
By making it clear to the other party in writing that the company does not intend the document to be treated as delivered until it is dated. The document may, for example, contain a suspensory clause stating "This document may only be treated as having been executed and delivered as a deed if it has been dated". This arrangement could be recorded by a board minute.
In practice, the Land Registry assumes that a document has been delivered unless there is some indication to the contrary (for example, if the words of execution have been modified to provide that delivery has not taken place, or that delivery is not to be presumed until some condition has been fulfilled - in such a case the Land Registry requires evidence that delivery has subsequently taken place) (see
Land Registry Practice Guide 8 (Execution of Deeds) (www.practicallaw.com/3-106-6606), paragraph 4.3).
Note that for deeds executed by a company before 15 September 2005, there also existed an irrebuttable presumption of delivery such that where a deed was executed in favour of a purchaser and purported to be signed by a director and the secretary of the company or by two directors of the company, it would be delivered on execution where it was clear on the face of the document that it was intended to be a deed. This irrebuttable presumption of delivery caused a number of problems in practice as it prevented companies from delaying delivery where appropriate and was inconsistent with the scheme of delayed delivery introduced by the Law of Property (Miscellaneous Provisions) Act 1989. Following recommendations of the Law Commission, this irrebuttable presumption was repealed by the
Regulatory Reform (Execution of Deeds and Documents) Order 2005 (www.practicallaw.com/1-201-0252) (SI 2005/1906) (RRO).
Even if delivered, a deed may contain a suspensory clause providing that it has no effect until a later date. Such a clause may also include an authority to date and deliver:
"This deed (other than this clause) has no effect until it has been dated. The dating of this deed by the solicitors or an agent or employee of the solicitors acting for a party who has signed or sealed this deed is deemed to have been authorised by that party".
A deed containing this clause will still be irrevocable following deemed delivery on physical execution.
The clause should not be used for land transactions because it will not be accepted by the Land Registry without proof of authority to date.
If a party wishes to ensure that a deed can be revoked after execution but before some other event (such as completion), an express right of revocation should be included in the deed.
A party to a deed can appoint an agent to deliver the deed on its behalf.
There is a presumption as to authority to deliver where a solicitor or licensed conveyancer (or their agent or employee) purports to deliver a deed on behalf of a party in the course of or in connection with a transaction (section 1(5), Law of Property (Miscellaneous Provisions) Act 1989). In relation to deeds executed before 15 September 2005, this presumption only applied to deeds in respect of transactions relating to the purchase of land or an interest in land.
The fact that a date has not been inserted does not generally affect the validity of a deed, which usually takes effect from its delivery, and external evidence is admissible to show the correct date (Morrell v Studd & Millington [1913] 2 Ch 648). There is a presumption that the date appearing in a deed is the date it took effect but this can be rebutted by evidence to the contrary (Browne v Burton (1847) 17 LJQB 49).
The normal practice where a solicitor or other agent delivers a deed as agent for one of the parties is for the solicitor to date the document on delivery (that is, on completion of the transaction).
It is possible to provide that a contract is deemed to have effect from a date in the past (whether it does is a matter of construction, see for example,
Northern and Shell plc v John Laing Construction Ltd, 16 July 2003 (www.practicallaw.com/A31864)). But this will only have the effect of allocating between the contracting parties the economic benefits and burdens which are the subject of the contract. It cannot affect relationships or obligations to third parties prior to the contract.
Backdating a document is potentially an offence under section 17 (false accounting) or section 19 (false statements by company directors) of the Theft Act 1968. It may also be conspiracy to defraud and contrary to the rules of professional conduct for solicitors (rule 1, Solicitors' Code of Conduct 2007).
It will not be possible for one party to decide not to date a document and hence avoid being bound by its terms. This is because a term will normally be implied into a contract containing a condition precedent to the effect that no party will prevent fulfilment of that condition.
An instrument may be delivered so that it does not take effect as a deed unless and until certain conditions are fulfilled. Strictly speaking, such an instrument is known as an escrow (rather than a deed) until those conditions are fulfilled, but the process is commonly referred to as the execution or delivery of a deed in escrow.
Because the instrument has been delivered, albeit in escrow, it is irrevocable, and cannot be withdrawn or recalled by the maker (Beesly v Hallwood Estates Limited [1961] Ch 105). Once the relevant condition or conditions have been satisfied, the instrument becomes effective, and, for the purposes of title, "relates back" to the date of execution in escrow but only for such purposes as are necessary to give effect to the transaction (Security Trust Co v Royal Bank of Canada [1976] AC 503 and see Terrapin International v IRC [1976] 2 All ER 461, Alan Estates v WG Stores [1982] Ch 511, Ansett Transport v Comptroller of Stamps [1985] VR 70).
Where, for example, an escrow is used in the context of a charge, there remains a distinction between the date of creation of the charge and the date the charge takes effect (by virtue of the relation back). The charge is created on the satisfaction of the escrow condition(s) but takes effect on the date the instrument was made as an escrow (Security Trust Co v Royal Bank of Canada [1976] AC 503). In the context of a charge, this is of particular relevance for the time for registering the charge at Companies House.
The "relation back" does not however affect any dealing by the person in whose favour the escrow is made with a third party.
Where an instrument is delivered in escrow, it is common commercial practice to agree in the escrow conditions that the document will be dated and become effective on the satisfaction of the conditions and therefore on the release from escrow. This practice is inconsistent, however, with judicial authority that a deed takes effect from delivery (Alan Estates Ltd v W G Stores [1982] Ch 511 CA and Johnsey Estates (1990) Ltd v Newport Marketworld Ltd and others, 10th May, 1996 (unreported)).
In Alan Estates Ltd v W G Stores, an undated lease and counterpart were executed and exchanged in escrow, and when the conditions of the escrow were fulfilled, the Court of Appeal held that the date of the lease was the date of the delivery in escrow.
The situation is different, however, where the counterpart lease has not been signed. In Dyment v Boyden [2004] EWCA 1586, the landlord had executed the lease in escrow and had delivered it to the tenant's solicitor with the counterpart to be executed by the tenant, and instructions not to release the lease until authorised to do so. The Court of Appeal held that when the escrow conditions had been met, the lease was not binding on the tenant because at that time, the tenant had not executed the counterpart. The court held that it was wrong in principle that an intended party to a lease should be treated as bound at a time before they had committed themselves, merely because the other party had delivered the lease in escrow and the escrow conditions were subsequently satisfied. For further information on this case, see
Legal update, Execution of leases delivered in escrow (www.practicallaw.com/A46078).
There are also transactions where the practice is to date a deed with the date of delivery in escrow. An example cited by the Law Commission in its 1996 Consultation Paper is where it is executed in this way shortly before the end of the maker's accounting year, and the conditions are not fulfilled until after that year has expired.
Facsimile seals and signatures
The Law Commission recommended that:
The requirement in what is now section 45(2) of the Companies Act 2006 that the name of a company must be engraved on its common seal should not be abolished. Other options such as laser printers which can print a seal which leaves a physical impression on the document were rejected.
There should not be any new statutory provision for a company to have one or more duplicate seals. (Companies are already allowed to have duplicate seals for specified purposes: use outside the UK (section 49, Companies Act 2006) and for sealing share certificates - the seal must be a facsimile of the common seal, with the addition of the word "Securities" on its face (section 50, Companies Act 2006)).
There should be no relaxation of the requirement for personal signature of deeds in the case of companies. The Law Commission noted that the purpose of requiring a deed to be signed is to have some personal authentication of the document. It also gives the company a measure of control over the obligations that it enters into by deed. (It should be noted that section 44(1)(a) of the Companies Act 2006 merely requires execution by affixing the common seal and leaves the company free to determine by its articles what additional formalities (such as attestation) are required.)
Note that the 1998 Report was produced before the implementation of the Electronic Communications Act 2000 (see
Electronic Signatures).
Note also that with regard to deeds relating to the dispositions of land or interests in land, the Land Registry will not accept a signature in facsimile unless it is authorised by any statute or statutory instrument having the force of law in England and Wales.
The EU has adopted a directive on a common framework for electronic signatures (99/93/EC) which member states were required to implement by 19 July 2001.
Part II of the
Electronic Communications Act 2000 (www.practicallaw.com/T1979), which implements the directive in the UK and contains provisions to ensure the admissibility of electronic signatures and related certificates in court, came into force in July 2000. (Those parts of the directive relating to the supervision of certification service providers, their liability in certain circumstances and data protection requirements concerning them are implemented in the UK by The Electronic Signatures Regulations 2002 (SI 2002/318).)
Electronic signatures and related certificates are admissible in evidence in legal proceedings in respect of any question regarding the authenticity or integrity of an electronic communication. The provisions are intended to be technology neutral.
An electronic signature is defined as anything in electronic form which is incorporated into or logically associated with an electronic communication and which purports to be used for the purposes of establishing the communication's authenticity or integrity. Certification is defined as the certification by any person that the signature or the process applied to it is a valid means of establishing the authenticity and/or integrity of the communication/data. UK and EU laws on electronic signatures do not affect the formalities required for the execution of deeds.
Section 8 of the Electronic Communications Act 2000 allows the government to modify existing legislation to facilitate the use of electronic communications. In 2001, the Law Commission published advice to the government on formal legal obstacles to electronic commerce. The government proposed to implement the Law Commission's recommendations as presented in its 1998 Report, and that further changes regarding electronic commerce will be made to the law as necessary following the Law Commission's advice.
The Law Commission's view (in its 2001 paper) was that changes are not necessary in relation to statutes requiring signatures, as the test for whether signature requirements are met is whether the conduct of the would-be signatory indicates an authenticating intention to a reasonable person. The High Court has followed this view in holding that, for the purposes of section 4 of the Statute of Frauds 1677, the presence of an automatically inserted e-mail address at the top of an e-mail did not constitute a signature by, or on behalf of, the would-be signatory as it was not inserted into the document in order to give, or with the intention of giving, authenticity to it.
Note that the Land Registration Act 2002 (as amended by the RRO) sets up a legislative framework for an electronic conveyancing system.
Substitution of signature pages
Land Registry requirements
Certain deeds affecting registered land must be in a prescribed form with prescribed execution provisions (rule 206, Land Registration Rules 2003) and in cases where there is no prescribed form, the deed must be in such form as the Land Registry may direct or allow (rule 212, Land Registration Rules 2003). The Land Registry's prescribed and suggested execution provisions in this regard are set out in LR Practice Guide 08 - Execution of deeds.
On 10 November 2008, the Land Registry Registration Rules 2003 were amended by the Land Registry Registration (Amendment) Rules 2008. The Land Registry Registration (Amendment) Rules 2008 made changes to some of the prescribed execution provisions in Schedule 9 to the Land Registry Registration Rules 2003 (that is, Forms of Execution C (execution by a company using its common seal), D(i) (execution by a company registered under the Companies Acts, or an unregistered company, without using a common seal) and D(ii) (execution by a company registered under the Companies Acts, acting by a director) (see Consolidated version of the Land Registry Registration Rules 2003).
Currently, there is a discrepancy between the prescribed wording of execution in Forms D(i) and D(ii) of Schedule 9 to the Land Registration Rules 2003 (as amended) and the corresponding execution clauses in LR Practice Guide 08 - Execution of deeds. While the wording prescribed by Forms D(i) and D(ii) begins with the words "Executed as a deed...", the corresponding execution clauses in paragraph 4.2 of LR Practice Guide 08 - Execution of deeds begin with the words "Signed as a deed....". The Land Registry has indicated that it will amend LR Practice Guide 08 - Execution of deeds in the future to deal with this discrepancy and has informally indicated to PLC that it will accept the wording either "Signed as a deed .." or "Executed as a deed..." where a Companies Act company executes a deed without using its common seal in accordance with section 44(2)(a) or (b) of the Companies Act 2006.
From 1 October 2009, Rule 8 of the Land Registration (Amendment) Rules 2009 further amends the forms of execution clause prescribed by rule 206(3) of, and set out in Schedule 9 to, the Land Registration Rules 2003 by:
Renumbering Form F as Form F(i) and amending this so that the execution clause begins with the words "Executed as a deed" rather than "Signed as a deed".
Adding an alternative form of execution for LLPs (Form F(ii)) for use where the document is to be executed by an LLP acting by a single member.
Formalities in non-UK jurisdictions In civil law jurisdictions, many documents (for example, transfers of land and charges) require notarisation by a notary.
A notary is a lawyer working in private practice who fulfils certain public functions delegated by the state. A notary's chief public function is to authenticate the execution of certain documents or to verify some fact or thing done.
Notarisation often involves the parties to the document appearing in person before a notary and executing the document. Alternatively a member of the notary's office may be granted a power of attorney to execute the document. The notary then certifies the due execution of the document. The form of the notarial certificate depends on whether the document is required in "public form" or "private form".
If the document is required in public form, the notary's certificate is embodied in the document itself. This is usually done by prefacing the operative part of the document with a recital as to the appearance of the parties before the notary and their personal particulars and capacities. The notary then adds a statement at the end (the "eschatocol") to the effect that the document was read out to the parties and executed in the notary's presence and that he or she has added his or her own signature. The notary then affixes his or her official seal.
If the document is required in private form, a relatively simple certificate is attached to the document verifying the execution of the document in the notary's presence.
Sometimes a further certificate (the "apostille") is added to the notarial certificate to certify the genuineness of the notary's signature and seal.
In most civil law jurisdictions, notarised documents have probative and executory force. This effectively gives a notarised document the force of a court judgment and greatly speeds up enforcement.
Costs vary from jurisdiction to jurisdiction, but most notaries are obliged to charge fees on a tariff set by the state. The fees are often a proportion of the contract amount and can be quite substantial.
Deeds, contracts under seal and specialties It used to be necessary to execute a document under seal in order for it to be a deed. Any contract entered into as a deed under seal has commonly been called a specialty. But reforms introduced in 1989 made two important changes (Law of Property (Miscellaneous Provisions) Act 1989) and Companies Act 1989). They permitted deeds to be executed without use of a seal (by both individuals and companies) and they introduced a requirement that the intention to create a deed must be clear on the face of the instrument (the so-called "face value requirement"). The reforms made no specific reference to specialties.
Since these changes there has been some debate about the relationship between deeds, contracts under seal and specialties. The debate is important because the 12-year limitation period applies to specialties (section 8, Limitation Act 1980) and a specialty is generally enforceable under common law despite any lack of consideration.
Some have argued that execution under seal is a key requirement of a specialty and that a deed of itself does not create a 12-year limitation period nor heal lack of consideration.
The Law Commission rejects this argument (Part 2, 1998 Report). It points out that companies may execute documents otherwise than by affixing the common seal) and that a document executed in the manner prescribed has the same effect as if executed under the common seal of the company (see section 44(4), Companies Act 2006). In the Commission's view, this confirms that a company seal is not necessary to ensure that a document is a specialty.
It also rejects the argument so far as individuals are concerned. It argues that an instrument is a specialty because it is in solemn form; it is a type of deed. Before 1989, execution in solemn form required the use of a seal, but this has no longer been necessary for execution of deeds by individuals since the Law of Property (Miscellaneous Provisions) Act 1989. Accordingly, a contract which is executed by an individual as a deed (that is by attested signature), and which makes it clear on its face that it is intended to be a deed will be both a deed and a specialty.
The Commission also considered the related question of whether a contract executed under seal would, without more, still be a deed - that is, whether the mere fact that a contract is executed under seal would be sufficient to make it clear that is intended to be a deed (and so satisfy the face value requirement). Despite a case to the contrary (Johnsey Estates (1990) Limited v Newport Marketworld Limited and Others 10th May, 1996 (unreported, Judge Moseley QC)), it considered that the mere fact of affixing a seal to an instrument is not sufficient in itself to show the intention to create a deed. Further, a document that is executed under seal but is not a deed is not a specialty; to be a specialty, an instrument must be a deed.
To deal with the uncertainty in this area, the Commission recommended that:
There should be a statutory provision making it clear that the face value requirement is not satisfied merely because an instrument is executed under seal. This provision has been enacted as section 1(2A) of the Law of Property (Miscellaneous Provisions) Act 1989.
There should be a statutory provision that except as otherwise provided by statute, an instrument should be a specialty only if it is a deed. This recommendation has not been implemented.
Virtual signings and closings There may be logistical problems in getting a document signed:
It may not be easy or possible to get everyone who needs to sign a document physically present for a signing or closing meeting.
Posting documents for signature may not be feasible or desirable because of, for example, time constraints, content security or complexity of signing requirements for multiple documents.
To address this problem, a practice of "virtual signings and closings" has developed where signature pages are prepared and executed in advance, and then transferred to the engrossed final form of the document once it is ready for completion.
The practice was considered by the High Court in R (on the Application of Mercury Tax Group Limited and another v HMRC [2008] EWHC 2721 (Admin). The judge held that the signature on an incomplete draft deed (or contract) cannot be transferred to effectively execute a complete and amended final version. The final form of deed was found not to be valid. For details of the Mercury caseseeL.
The Mercury decision caused widespread concern and many people have, as a result, organised physical signing meetings to conclude a transaction that previously would have been concluded less formally. This can be expensive and time-consuming. PLC obtained some initial advice from David Thomas QC of Keating Chambers.
In May 2009, acting in response to the Mercury case, a joint working party of The Law Society Company Law Committee and The City of London Law Society Company Law and Financial Law Committees (JWP) published a guidance note (approved by Leading Counsel, Mark Hapgood QC) on a non-exhaustive range of options for dealing with executions at virtual signings or closings, i n February 2010 when the Law Society published its own practice note Execution of documents at virtual signings or closings which substantially followed the Note.
The Law Society Company Law Committee and CLLS guidance note confirms that:
The Court of Appeal decision in Koenigsblatt v Sweet [1923] 2 Ch 314 remains the leading authority on the applicability of the principles of authority and ratification to the creation of legally binding written agreements.
Mercury should be viewed as limited to its particular facts and, to the extent that it is inconsistent with Koenigsblatt, a Court of Appeal decision, Koenigsblatt should prevail.
The Note suggests three options for dealing with virtual signings and closings of documents that are governed by English law. These are set out below, using the same wording as contained in the Note. The Note also summarises the options in table form, which we have reproduced below.
The options set out in the Note are non-exhaustive and each transaction should be approached according to its own facts. There may be other procedures, restrictions or requirements relating to the deal or a particular party that should be given precedence. The background section in the Note suggests other issues that may need to be considered.
Option 1: Counterparts signed by each party (deeds, real estate contracts, guarantees and simple contracts)
The suggested steps under Option 1 are as follows:
Before signing/closing the proposed arrangements for the virtual signing/closing are agreed between all parties' lawyers.
When the documents are finalised, the final execution copies of the documents are e-mailed (as pdf or Word attachments) to all absent parties and/or their lawyers, as agreed. For convenience, a separate pdf or Word document containing the relevant signature page may be attached.
Each absent signatory prints and signs the signature page only. There is no need to print off the full document.
Each absent party then returns a single e-mail to its lawyers or to the lawyers co-ordinating the signing/closing (as agreed) to which is attached (a) the final version of the document (pdf or Word); and (b) a pdf copy of the signed signature page. In the case of deeds, the arrangements will also need to make clear when delivery is to take place or, alternatively, to make clear that a deed has not been delivered merely because it has been signed and the steps set out above followed.
At or shortly after signing/closing, to evidence the execution of the final document, a final version of the document, together with copies of the executed signature pages, may be circulated by one of the law firms.
In Mercury, the judge said that the signature and attestation must form part of "the same physical document" when the deed is signed.
The JWP and Leading Counsel consider that the final version of the document (in pdf or Word) and the pdf of the signed signature page (both attached to the same e-mail) will constitute an original signed document and will equate to the "same physical document".
One or more additional originals may be created by printing off the final execution copy of the document and attaching to it the pdf copy of the signed signature page, as required.
Note: it may be necessary to prepare another original of the document with "wet ink" signatures of all the parties if the document has to be filed (for example, with Companies House or the Land Registry).
Option 2: print off and sign signature page from final document (guarantees (not executed as deeds) and simple contracts)
The suggested steps under Option 2 are as follows:
Before signing/closing, the proposed arrangements for the virtual signing/closing are agreed between all parties' lawyers.
When the documents are finalised, the final execution copies of the documents are emailed (as pdf or Word attachments) to all absent parties and/or their lawyers (as agreed). For convenience, a separate pdf or Word document containing the relevant signature page may be attached.
Each absent signatory prints and signs the signature page only (there is no need to print off the full document).
Each absent party then e-mails its signed signature page (as a pdf attachment) to its lawyers or to the lawyers co-ordinating the signing/closing (as agreed) with authority to attach it to the final approved version of the document. The degree of formality required for this authority to be given will depend on the circumstances. Where the authority is to a firm that is not acting for the party represented by the signatory, a greater degree of formality may be appropriate.
At or shortly after signing/closing, to evidence the execution of the final document, a final version of the document, together with copies of the executed signature pages, may be circulated by one of the law firms.
The only difference between Option 1 and Option 2 is at step 4.
A print-off of the execution version of the document with the attached signed signature pages will constitute an original signed document.
Option 3: pre-signed signature pages collected before documents are finalised (guarantees and simple contracts)
The suggested steps under Option 3 are as follows:
Before signing/closing, the proposed arrangements for the virtual signing/closing are agreed between all parties' lawyers.
In sufficient time before signing/closing, the law firm co-ordinating the signing/closing e-mails (or circulates hard copies of) the signature pages relating to the documents still being negotiated to each person who will not be present at the closing or to his lawyers. Each signature page should, as a matter of good practice, clearly identify the document to which it relates (for example, Credit Agreement – signature page).
The signature page is executed by each of the signatories and returned to his lawyers or to the law firm co-ordinating the signing/closing (as agreed) by e-mail (as a pdf attachment) or by courier, to be held to the order of the signatory (or his lawyers) until authority is given for it to be attached to the document to be signed.
Once each document has been finalised, the law firm co-ordinating the signing/closing e-mails the final version of the document to each absent party (and/or its lawyers) and obtains confirmation from it (or its lawyers) that it has/they have agreed the final version of the document and authorising the relevant law firm to attach the pre-signed signature page to the final version and to date and release the document. The degree of formality required for this authority to be given will depend on the circumstances. Where the authority is to a firm that is not acting for the party represented by the signatory, a greater degree of formality may be appropriate.
The final approved version of the document with the pre-signed signature pages that have been attached with the prior approval of the parties (or their lawyers) will constitute the original signed document.
Deeds, real estate contracts, guarantees and simple contracts
Mercury involved a deed that was being executed by an individual.
Section 1(3) of the Law of Property (Miscellaneous Provisions Act 1989 (LPMPA 1989) provides that:
"An instrument is validly executed as a deed by an individual if, and only if:
(a) it is signed:
(i) by him in the presence of a witness who attests the signature; or
(ii) at his direction and in his presence and the presence of two witnesses who each attest the signature; and
(b) it is delivered as a deed by him or a person authorised to do so on his behalf."
The judge in Mercury interpreted section 1(3) to mean that the signature and attestation must form part of the same physical document, and that the final version of the deed must be executed.
By analogy, the judge's approach could apply to:
Execution by a company (section 74A, Law of Property Act 1925; sections 44 and 46, Companies Act 2006).
Contracts for the sale or other disposition of an interest in land (section 2, LPMPA 1989).
Leading Counsel and the JWP take a different view on the interpretation of section 1(3) of the LPMPA 1989 from that of the judge in Mercury. This is an issue of statutory interpretation and was not an issue that was addressed in Koenigsblatt.
In view of this, Leading Counsel and the JWP promote Option 1 as a prudent approach to the execution of deeds at a virtual signing/closing, while acknowledging that Option 1 is not the only way to execute a valid deed at a virtual signing.
The judge's approach in Mercury may apply, by analogy, to the requirements in section 2 of the LPMPA 1989 for contracts for the sale or other disposition of an interest in land.
A contract for the sale of land or other disposition may be in a "stand alone" document but may also be part of a document recording a broader transaction, such as an asset or business sale. A disposition includes, for example, the grant of a lease or a mortgage.
The Note states that if a document includes contractual obligations to sell, lease or charge real estate, and it is proposed to have a virtual signing, Option 1 provides a prudent approach.
The Note acknowledges that many real estate contracts will be exchanged using one of the Law Society telephone exchange formulae. Where this is done, the Note states that the lawyers should make it very clear on exchange of contracts if the part of the contract that they are holding does not have a "wet ink" signature. Contracts should not be exchanged if the solicitor for the other party does not wish to accept a part of the contract that has been "virtually" signed.
The Law Society's February 2010 guidance highlights that a virtual signing or closing may not be appropriate where the parties are unwilling to rely on the other parties' undertakings or contractual obligations to produce 'wet-ink' signed originals, for example, where property documents require registration. The guidance suggests that solicitors should only give an undertaking to send the 'wet-ink' signed parts of documents to the solicitors responsible for carrying out the relevant registration when they are actually holding the 'wet-ink' signed documents, not when they have merely seen electronic images of them.
Section 4 of the Statute of Frauds 1677 requires a guarantee, or a memorandum or note of a guarantee, to be in writing and signed by or on behalf of the guarantor.
"Signature" for these purposes has been given a wide interpretation so that an e-mail can be a sufficient memorandum or note if the name of the guarantor appears in the body of the e-mail (and not just information in an e-mail header inserted automatically) with the intention that it is a "signature" and there is evidence of an intention to contract, rather than a mere statement of expectation (N Mehta v J Pereira Fernandes SA [2006] EWHC 813).
Attaching a signature page to a final approved version of a document with the specific authority of the signatory is considered to be a "signature" within the wide meaning of signature and would satisfy the test in Mehta.
If a guarantee is executed as a simple contract, Option 1 or 2 may be followed.
Option 3 may also be appropriate if there is clear evidence that the signatories (or their lawyers or other authorised signatory) have authorised the attachment of their signatures to the final form of the guarantee.
If a firm is issuing a legal opinion in relation to guarantees, the lawyer should bear in mind the distinction in section 4 of the Statute of Frauds 1677 between guarantees and memorandum or notes of guarantees. The Note states that when Option 2 or 3 is used, the legal opinion could refer to the guarantee as a "legally binding guarantee" rather than a "contract of guarantee".
For an explanation of the difference between the concepts of a "legally binding guarantee" and a "contract of guarantee".
Unless a contract is for the sale or other disposition of an interest in land or a guarantee, a simple contract can generally be formed without any signature provided the essential elements of a contract are present.
The final approved version of the document with the pre-signed signature pages (whether pdf or "wet ink") that have been attached with the prior approval of the parties or their lawyers, will constitute an original signed document.
Summary of execution options
Type of document | Option 1 – return PDF/Word counterparts plus signature page | Option 2 – return signature page only | Option 3 – advance pre-signed signature pages |
Deeds | √ | no | no |
Real estate contracts | √ | no | no |
Guarantees (stand-alone or contained in simple contracts) | √ | √ | √ |
Simple contracts (not incorporating any of the above) | √ | √ | √ |
Execution: presumption of due execution There are two statutory presumptions of due execution in favour of third parties dealing with a corporation: section 74(1) of the Law of Property Act 1925 and section 44(5) of the Companies Act 2006. Section 44(5) applies in respect of documents executed on or after 6 April 2008. For documents executed before that date, section 36A of the Companies Act 1985 applies.
Section 74(1) provides that in favour of a purchaser, an instrument is deemed to be duly executed by a corporation aggregate if a seal purporting to be the corporation's seal is affixed to the instrument in the presence of and attested by:
Two members of the board of directors, council or other governing body of the corporation; or
One such member and the clerk, secretary or other permanent officer of the corporation or his deputy.
(Note that before 15 September 2005, section 74(1) applied only to "deeds" rather than "instruments"; it contained a restriction which required attestation of the seal by the secretary and did not allow attestation of the seal by two directors.)
A "purchaser" means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property (section 205(1)(xxi), Law of Property Act 1925).
A "corporation aggregate" includes a local authority, building society and company incorporated under the Companies Acts or Charities Acts. (For a full definition of corporation aggregate, see Halsbury's Laws of England (4th Edition 1974) Vol. 9, paragraph 1204).
The purpose of section 74 is to make it unnecessary for a purchaser to require proof of a corporation's formal compliance with the provisions of its memorandum and articles or its charter (see dictum of Nourse LJ in Longman v Viscount Chelsea (1989) 58 P & C R 189 at page 199). The Law Commission, in the 1996 Consultation Paper, is of the view that it would seem to follow that a purchaser would still be in good faith even if, technically speaking, aware of an irregularity in the manner of execution by virtue of having constructive notice of its articles.
Note that section 74(1):
Applies to all instruments.
Only applies in favour of a purchaser.
Applies to all corporations aggregate.
Only applies to execution under common seal.
Allows for attestation by two directors. (The former restrictions on the identities of those persons required to attest affixing of the seal were changed by the RRO.)
Section 74A of the Law of Property Act 1925 (as inserted by the RRO) provides a presumption that where a deed is duly executed by a corporation aggregate and is delivered as a deed, the deed is presumed to be delivered on its being executed, unless the contrary is proved.
Section 44(5) of the Companies Act 2006 extends the protection afforded to a purchaser under section 74(1) of the Law of Property Act 1925 (execution under common seal) to the situation where a company signs under section 44(2) of the Companies Act 2006.
Section 44(5) provides that in favour of a purchaser, a document is deemed to have been duly executed by a company if it purports to be signed on behalf of the company by:
Two authorised signatories; or
A director of the company in the presence of a witness who attests the signature.
A document signed in accordance with section 44(2) and expressed (in whatever form of words) to be executed by the company has the same effect as if executed under the company's common seal (section 44(4), Companies Act 2006).
A "purchaser" means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property (section 44(5), Companies Act 2006).
"Authorised signatories" are:
Every director of the company.
In the case of a private company with a secretary or a public company, the company secretary or joint company secretary (section 44(3), Companies Act 2006).
Where a document is signed by one authorised signatory before 6 April 2008 and by another on or after that date, it is treated as executed on or after 6 April 2008 and so section 44 of the Companies Act 2006 applies to it (paragraph 1(3), Part 1, Schedule 4, The Companies Act 2006 (Commencement No. 5, Transitional Provisions and Savings) Order 2007 (SI 2007/ 3495)).
Note that section 44(5):
Applies to any document.
Only applies in favour of a purchaser.
Only applies to companies incorporated under the Companies Acts.
Only applies to execution by two authorised signatories or a single director in the presence of a witness who attests the signature.
The key differences between sections 74(1) and 44(5) are:
Section 74(1) | Section 44(5) |
All instruments | All documents |
Must be sealed | Need not be sealed |
All corporations aggregate (including Companies Act companies) | Companies Acts companies |
Deputy company secretary may attest | Assistant or deputy company secretary may not sign |
Two directors may attest | Two authorised signatories may sign or single director may sign provided his signature is witnessed and attested |
Execution: testimonium clause Execution clauses for commercial documents will usually be preceded by a testimonium clause (that is, a clause which formally shows that the parties are executing the document and agree with the terms of the document). The testimonium and execution clauses may appear before any schedules to the agreement (US style) or after the schedules (English style).
Traditionally, the testimonium clause would begin with the words "As witness whereof...." in the case of a simple contract or "In witness whereof...." (in the case of a deed). Nowadays, in simple contracts, the testimonium may take the following form:
"This agreement has been entered into on the date stated at the beginning of it."
In the case of a deed the testimonium may take the following wording:
"This document has been executed as a deed and is delivered and takes effect on the date stated at the beginning of it."
The testimonium clause is not necessary for the validity of the agreement and indeed it is no longer necessary to have a testimonium in instruments relating to dealings with registered land (Land Registration Rules 2003 (SI 2003/1417)). However, in agreements, other than instruments relating to registered land, it is advisable to include a testimonium as evidence of due execution (Burdett v Spilsbury, Skynner v Spilsbury (1843) 10 Cl & Fin 340, HL); and in the case of deeds, the testimonium clause may be used to aid the face value requirement (by specifying the word "deed" in the testimonium and, if appropriate, to rebut the presumption that a document executed by a company is to be delivered as a deed on execution (section 46(2), Companies Act 2006).
EXECUTION FORMALITIES: INDIVIDUALS
Execution clause: simple contracts — individuals
Signed by [NAME OF INDIVIDUAL] | .................................................. |
Drafting notes: simple contracts — individuals
An individual can execute a simple contract by signature. A witness is not needed.
Execution clause: deeds — individuals
Signed as a deed by [FULL NAME OF PARTY] in the presence of: | ......................................... [SIGNATURE OF PARTY] |
..................................... [SIGNATURE OF WITNESS] |
|
[NAME, ADDRESS [AND OCCUPATION] OF WITNESS] |
|
OR
Signed as a deed by [FULL NAME OF PERSON SIGNING] at the direction and on behalf of [NAME OF PARTY TO DEED]) in [his OR her] presence and in the presence of: | ......................................... [SIGNATURE OF PARTY] by [NAME OF PERSON SIGNING] |
..................................... [SIGNATURE OF FIRST WITNESS] |
|
[NAME, ADDRESS [AND OCCUPATION] OF FIRST WITNESS] |
|
..................................... [SIGNATURE OF SECOND WITNESS] [NAME, ADDRESS [AND OCCUPATION] OF SECOND WITNESS] |
|
Drafting notes: deeds — individuals
Individuals are no longer required to execute deeds under seal (section 1(1)(b), Law of Property (Miscellaneous Provisions) Act 1989).
An instrument is validly executed by an individual as a deed if, and only if:
It is signed by the individual in the presence of a witness who attests the signature (see first alternative clause); or
It is signed at the direction and in the presence of the individual and the presence of two witnesses who each attest the signature (see second alternative clause); and in either case
It is delivered as a deed (section 1(3), Law of Property (Miscellaneous Provisions) Act 1989).
Note that in a Court of Appeal case, a party was estopped from denying the validity of a document under section 1(3) where the witness did not sign in the presence of the party (Shah v Shah [2001] EWCA Civ 527 ).
The first alternative clause is the usual form of execution. The second may be used where the party to the deed is physically incapable of signing. In the second case the person signing should sign both their own name and the name of the party to the deed: "John Smith by Jane Brown".
In each of the above clauses the Land Registry recommends that the name of the witness is stated in block capitals.
A party to a transaction cannot be an attesting witness (Seal v Claridge (1881) 7 QBD 516). For example, a person cannot sign as a witness to a power of attorney in his or her favour.
Legislation does not specifically prohibit a signatory's spouse, co-habitee or civil partner acting as a witness, but this is best avoided. There is also no apparent prohibition against a minor acting as a witness. However, it is generally advisable to avoid this or at least to ensure that any minor who acts as a witness is of sufficient maturity for his or her evidence to be regarded as reliable should it later prove necessary to verify the circumstances under which the execution took place.
See also LR Practice Guide 08 - Execution of deeds , paragraph 3, which gives further information on cases where an individual is unable to read, understand or physically able to sign a deed.
EXECUTION FORMALITIES: PARTNERSHIPS
Execution clause: simple contracts — partnerships
Signed by [NAME OF PARTNER] for and on behalf of [NAME OF PARTNERSHIP] | .................................................. |
| [SIGNATURE OF PARTNER] Partner |
Drafting notes: simple contracts — partnerships
Each partner has wide authority to contract on behalf of the partnership and the other partners will be bound by the acts of the partner provided he or she has the requisite authority. Where the partner is an individual, the form of execution is the same as for an individual together with a reference to the partnership and status of the partner as such.
Execution clause: deeds — partnerships
Signed as a deed by [NAME OF PARTNER] |
|
for and on behalf of the partners in the firm of [NAME OF PARTNERSHIP] | ......................................... |
under a power of attorney dated [DATE] | [SIGNATURE OF PARTNER] as attorney for the partners in [NAME OF PARTNERSHIP] |
in the presence of: |
|
..................................... |
|
[SIGNATURE OF WITNESS] |
|
[NAME, ADDRESS [AND OCCUPATION] OF WITNESS] |
|
Drafting notes: deeds — partnerships
An individual partner does not have authority to execute a deed on behalf of a partnership (Harrison v Jackson (1797) 7 TR 207; 101 ER 935; Steiglitz v Egginton (1815) Holt 141; 171 ER 193; Marchant v Morton, Down & Co [1901] 2 KB 829), unless the authority has been expressly conferred by deed (Berkeley v Hardy (1826) 5 B & C 355).
Deeds should therefore be executed by all partners unless one or more partners is given power of attorney to execute deeds on behalf of the partnership. The execution clause above is drafted on this basis. Some partnership deeds expressly confer authority on a partner or partners to do this.
As the document is a deed and execution is by an individual, the signature should be witnessed (and the deed delivered) in order to comply with section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989.
EXECUTION FORMALITIES: LIMITED PARTNERSHIPS FORMED UNDER THE LIMITED PARTNERSHIPS ACT 1907
An English limited partnership is a partnership registered in accordance with the Limited Partnerships Act 1907. It is basically the same as a general partnership under the Partnership Act 1890 (ordinary partnership), except that, alongside one or more "general partners" who have responsibility for managing the business of the limited partnership, certain partners elect not to take an active role in the operation of the limited partnership in return for receiving limited liability ("limited partners"). In recent years, the limited partnership has become a vehicle for certain types of funds, especially venture capital funds.
In English law, a limited partnership is not a legal entity, although there have been proposals to change this position. Currently, the government is not proposing to give limited partnerships legal personality (see Legal update, Limited partnerships: BERR consultation on reform).
Management of a limited partnership's business is undertaken by the general partner(s) exclusively (although the general partner is not considered to have the power to change the nature of the partnership business in order to extend his authority). If a limited partner takes part in the management of the partnership business, he will become liable for the debts of the partnership incurred for the period during which he was involved.
A general partner has the same implied authority to bind the limited partnership as a member of an ordinary partnership, whereas a limited partner has no power to bind the firm and may not take part in its management. A general partner is liable for all debts and obligations of the limited partnership (section 4(2), Limited Partnerships Act 1907).
Section 4(4) of the Limited Partnerships Act 1907 expressly confirms that a body corporate may be a limited partner but it does not provide that a body corporate may be a general partner. However, Companies House routinely registers limited partnerships which have companies as general partners - such practice is in line with the argument that any person who has the capacity to enter into an ordinary partnership may become a partner in a limited partnership as no restrictions are imposed by the Limited Partnerships Act 1907.
In July 2006, the government announced its intention to reform the law on limited partnerships in accordance with the Law Commission's recommendations in its 2003 report on partnership law reform (Law Com No 283; Scot Law Com No 192)). On 29 August 2008, BIS (then called BERR) published a consultation document. The intention was to repeal The Limited Partnerships Act 1907 and insert new provisions regarding limited partnerships into the Partnership Act 1890. The changes were originally intended to take effect from 1 October 2009 but, in light of the responses to the consultation, BIS decided not to proceed with those proposals).
On 27 July 2009, The Legislative Reform (Limited Partnerships) Order 2009 (SI 2009/1940) was published. It will come into force on 1 October 2009 and apply to limited partnerships for which registration applications are received on or after that date. The Order clarifies the process for registration of limited partnerships by the registrar of companies. For background information.
Execution clause: simple contracts — limited partnerships
Signed by [NAME OF GENERAL PARTNER] for and on behalf of [NAME OF LIMITED PARTNERSHIP] | ............................... [SIGNATURE OF GENERAL PARTNER] General partner |
Drafting notes: simple contracts — limited partnerships
A simple contract can be made on behalf of a limited partnership by the general partner(s) acting under implied authority.
Execution clause: deeds — limited partnerships
[Executed as a deed OR signed as a deed] by [NAME OF LIMITED PARTNERSHIP] acting by [NAME OF INDIVIDUAL GENERAL PARTNER], general partner, in the presence of: ............................. [SIGNATURE OF WITNESS] [NAME, ADDRESS [AND OCCUPATION] OF WITNESS] OR | ................................ [SIGNATURE OF INDIVIDUAL GENERAL PARTNER] |
[Executed as a deed OR signed as a deed] by [NAME OF LIMITED PARTNERSHIP] acting by [NAME OF CORPORATE GENERAL PARTNER], general partner, acting by [NAME OF DIRECTOR], a director and [NAME OF SECRETARY], the secretary OR [NAME OF DIRECTORS], two directors] | ................................ [SIGNATURES OF ONE DIRECTOR AND THE COMPANY SECRETARY OR TWO DIRECTORS OF CORPORATE GENERAL PARTNER] |
Drafting notes: deeds — limited partnerships
Unlike ordinary partnerships governed solely by the Partnership Act 1890 (in which an individual partner does not have authority to execute a deed on behalf of the firm unless the authority has been expressly conferred by deed, it is thought that section 6 of Limited Partnerships Act 1907 modifies the general law on partnerships such that a general partner of a limited partnership has the implied authority to execute a deed to bind the firm, where the deed is framed and executed in the appropriate manner (that is, it is expressed to be executed by the partnership and signed by the general partner). (It is also suggested that even if this were not the case, where a deed is binding on the general partner, a claim under the deed will be enforceable against him and if the deed was executed in pursuance of his authority, he will be able to apply the partnership assets in settlement of that claim (see paragraph 30.03, Lindley & Banks on Partnership, 18th Edition).)
The first of the above execution clauses provides for the deed to be executed by the limited partnership acting by its general partner who is an individual. The second clause is to be used where the general partner is a company which is acting by either two directors or one director and the company secretary.
EXECUTION FORMALITIES: COMPANIES ACT COMPANIES
The provisions below relate to execution of documents, on or after 1 October 2009, by companies incorporated under the Companies Act 2006 or former Companies Acts and also to companies registered in Northern Ireland.
Sections 43, and 45 to 47 of the Companies Act 2006 came into force on 1 October 2009; and section 44 of the Companies Act 2006 is effective for execution of documents on or after April 2008.
Under section 43 of the Companies Act 2006, a simple contract can be made either:
By a company by writing under its seal (or by using the other methods for execution by a company in section 44 of the Companies Act 2006) (sections 43(1)(a) and 44(4), Companies Act 2006); or
On behalf of a company by any person acting under its authority (express or implied) (section 43(1)(b), Companies Act 2006).
Where a simple contract is executed by a person on behalf of a company under section 43(1)(b) of the Companies Act 2006 (rather than by the company itself), whether or not the company is bound by the contract will depend, among other things, on the signatory's authority under common law agency principles and statutory.
Section 44 of the Companies Act 2006 governs the way in which Companies Acts companies themselves execute deeds (and may execute other documents) on or after 6 April 2008. (Section 36A of the Companies Act 1985 applied in respect of deeds and documents executed by a company before 6 April 2008 (see below).)
Section 44 of the Companies Act 2006 provides three ways for a company to execute a document on or after 6 April 2008:
By affixing its common seal (section 44(1)(a)); or
By the document being signed on behalf of the company by either:
Two authorised signatories (section 44(2)(a)); or
A director of the company in the presence of a witness who attests the signature (section 44(2)(b)).
The latter two options under section 44(2) are available whether or not the company has a common seal (section 45(1), Companies Act 2006 ); and a document signed in accordance with section 44(2) and expressed (in whatever form of words) to be executed by the company has the same effect as if executed under the company’s common seal (section 44(4), Companies Act 2006).
For the purposes of section 44(2)(a) of the Companies Act 2006, authorised signatories are:
Every director of the company.
In the case of a private company with a secretary or a public company, the company secretary or joint company secretary (section 44(3), Companies Act 2006).
A company may also appoint an individual as its attorney and that individual may then execute a deed as attorney for the company.
For deeds and documents executed before 6 April 2008, section 36A of the Companies Act 1985 provided two ways for a company to execute a document:
By affixing its common seal (section 36A(2), Companies Act 1985); or
By a director and secretary of the company or two directors each signing the document and by the document being expressed (in whatever form of words) to be executed by the company (section 36A(4), Companies Act 1985). This option was available whether or not the company had a common seal (section 36A(3), Companies Act 1985).
For details of the Companies Act 2006 changes to the ways in which companies execute deeds and documents with effect from 1 October 2009.
The execution clauses below are suggested execution clauses applicable for execution by companies on or after 1 October 2009.
Execution clause: simple contracts — Companies Act companies
Signed by [NAME OF DIRECTOR] for and on behalf of [NAME OF COMPANY] | ............................... |
| [Signature of director] Director |
OR
Executed by [NAME OF COMPANY] acting by [NAME OF FIRST DIRECTOR], a director and [NAME OF SECOND DIRECTOR OR SECRETARY], [a director OR its secretary] | ............................... [SIGNATURE OF FIRST DIRECTOR] Director |
| ............................... [SIGNATURE OF SECOND DIRECTOR OR SECRETARY] [Director OR Secretary] |
OR
Executed by [NAME OF COMPANY] acting by [NAME OF DIRECTOR], a director, in the presence of: ............................. [SIGNATURE OF WITNESS] [NAME, ADDRESS [AND OCCUPATION] OF WITNESS] | ……………………………………. [SIGNATURE OF DIRECTOR] Director |
Drafting notes: simple contracts — Companies Act companies
The usual form where a deed is not required is for the company to be the named party to the contract which is signed on the company's behalf by a director or other person with authority, in accordance with section 43(1)(b) of the Companies Act 2006 (as in the first execution clause above). The signature does not need to be witnessed for this method of execution. Whether or not the company is bound by the contract executed in this way will depend, among other things, on the authority of the signatory determined under common law agency principles and statutory provisions.
Important contracts are commonly executed by a company in accordance with section 44 of the Companies Act 2006. While this is not a statutory requirement (there being no statutory distinction between simple contracts and "important" simple contracts), it may be an internal requirement of a company to execute significant simple contracts in this way rather than by signature of a director on the company's behalf in accordance with section 43(1)(b) of the Companies Act 2006. Execution by a company can be under seal, by signature of two authorised signatories (two directors or a director and secretary) (as in the second execution clause above) or by signature of one director in the presence of a witness who attests his signature (as in the third execution clause above) (sections 44(1(a) and 44(2), Companies Act 2006).
Execution clause: deeds — Companies Act companies (using common seal (in accordance with articles requiring attestation by a director and the secretary or by a second director))
Executed as a deed by affixing the common seal of [NAME OF COMPANY] in the presence of: | [COMMON SEAL] |
................................................ [SIGNATURE OF DIRECTOR] Director |
|
................................................. [SIGNATURE OF DIRECTOR OR SECRETARY] [Director OR Secretary] |
|
Drafting notes: deeds — Companies Act companies (using common seal (in accordance with articles requiring attestation by a director and the secretary or by a second director))
The company's name must be engraved in legible characters on the seal (section 45(2), Companies Act 2006).
Execution under seal is not sufficient to fulfil the requirement that in order to be a deed, a document must clearly be intended to be a deed on its face (section 1(2A), Law of Property (Miscellaneous Provisions) Act 1989). If the seal is affixed to a document that is intended to be a deed, the wording of the document should still clearly state that it is a deed.
Section 44(1)(a) of the Companies Act 2006 simply states that a document may be executed by a company "by the affixing of its common seal" but it seems unlikely that this overrides the need for a company to comply with its articles, which will often specify the person or persons who must attest the affixing of the seal. The example given above is for a company whose articles require the seal to be affixed in the presence of two of its officers.
Many companies' articles allow the company seal to be affixed to a deed in the presence of a person or persons other than a director and the secretary.
The default model articles for private companies limited by shares, incorporated on or after 1 October 2009, provide, in Article 49, that:
"(1) Any common seal may only be used by the authority of the directors.
(2) The directors may decide by what means and in what form any common seal is to be used.
(3) Unless otherwise decided by the directors, if the company has a common seal and it is affixed to a document, the document must also be signed by at least one authorised person in the presence of a witness who attests the signature.
(4) For the purposes of this article, an authorised person is: (a) any director of the company; (b) the company secretary (if any); or (c) any person authorised by the directors for the purpose of signing documents to which the common seal is applied."
(Article 49, Schedule 1, Companies (Model Articles) Regulations 2008 (SI 2008/3229).)
Companies whose articles contain article 49 of the Model Articles (or its equivalent) could amend the suggested execution clause for execution a by a company under the company seal so that the document is signed by one authorised person only but if this is done the presumption of due execution under section 74(1) of Law of Property Act 1925, will not apply.
Unlike its predecessor model article in article 101 of Table A of the Companies Act 1985, article 49 of the model articles for private companies limited by shares does not include the specific right for a committee of the directors to authorise the use of a common seal but, article 5 of the model articles under the Companies Act 2006 allows delegation to any such person or committee as the directors think fit.
The articles of some larger listed companies may allow deeds to be executed by the seal being affixed in the presence of an attesting authorised person - this enables deeds to be executed by seal without the presence of a main board director or the company secretary (see article 81, Schedule 3, Companies (Model Articles) Regulations 2008 (SI 2008/3229)). In such cases, the other party to the deed should verify the authority of the authorised person, for example, by checking the articles and requiring production of a board minute to demonstrate that the authorised person is properly authorised.
The Land Registry recommends use of the above clause when a company seals a deed, including a deed in one of the forms prescribed by Schedule 1 of the Land Registration Rules 2003 (as amended). This execution clause is in accordance with the form of execution prescribed by Form C in Schedule 9 of the Land Registration Rules 2003 (as amended) (in relation to dispositions of land by a company registered under the Companies Acts, or an unregistered company, using its common seal), effective from 10 November 2008.
Where the seal is attested by a director and the secretary or by two directors, a purchaser has the protection of section 74(1) of the Law of Property Act 1925. (In relation to deeds executed before 15 September 2005, a purchaser did not have the protection of section 74(1) if the seal was attested by two directors, and the Land Registry used to require the seal to be attested by a director and the secretary (or the deputy secretary) to give section 74(1) protection).
Where the seal is witnessed by persons other than a director and the secretary or two directors, the Land Registry may require evidence that such persons are duly authorised under the company's articles. Where the authority of the persons attesting depends on a board decision of the company, the Land Registry may also require a certified copy of the board resolution.
(Note that a company may execute a deed without using its common seal by execution in accordance with section 44(2) of the Companies Act 2006, in which case a purchaser is protected by section 44(5) of the Companies Act 2006 in relation to deeds executed on or after 6 April 2008.
Execution where the director or secretary is also a company
Where a director or the secretary is itself a company it must act, and attest, through the agency of a real person, who must be duly authorised. Section 74(1B) of the Law of Property Act 1925 provides that for the purposes of section 74(1), a seal purports to be affixed in the presence of and attested by an officer of the corporation, in the case of an officer which is not an individual, if it is affixed in the presence of and attested by an individual authorised by the officer to attest on its behalf.
Where the deed is to be executed by the affixing of the seal of the executing company, the agent of the corporate director or secretary must be physically present at the affixing of the seal and must then attest with his or her signature. The Land Registry recommends the following execution clause for the use of the seal where the director or secretary is also a company (see also LR Practice Guide 08 - Execution of deeds, paragraph 4.4):
Executed as a deed by affixing the common seal of [NAME OF EXECUTING COMPANY] in the presence of a director and [NAME OF INDIVIDUAL ACTING FOR THE CORPORATE SECRETARY OR DIRECTOR] duly authorised by [NAME OF CORPORATE SECRETARY OR DIRECTOR] to attest the affixing of the seal on its behalf as [secretary OR director] of [NAME OF EXECUTING COMPANY] | [COMMON SEAL] |
............................... [SIGNATURE OF DIRECTOR] Director |
|
............................... [SIGNATURE OF DIRECTOR OR SECRETARY] [Director OR secretary] |
|
|
|
|
|
Execution clause: deeds — Companies Act companies (without using common seal)
Executed as a deed by |
|
[NAME OF EXECUTING COMPANY] |
|
acting by [NAME OF FIRST DIRECTOR], a director | ............................... |
and [NAME OF SECOND DIRECTOR OR SECRETARY], [a director OR its secretary] | [SIGNATURE OF FIRST DIRECTOR] Director |
| ............................... [SIGNATURE OF SECOND DIRECTOR OR SECRETARY] [Director OR Secretary] |
OR
Executed as a deed by [NAME OF EXECUTING COMPANY] acting by [NAME OF DIRECTOR], a director, in the presence of: ............................. [SIGNATURE OF WITNESS] [NAME, ADDRESS [AND OCCUPATION] OF WITNESS] | ………………………….. [SIGNATURE OF DIRECTOR] Director |
|
|
Drafting notes: deeds — Companies Act companies (without using common seal)
Either of the above forms of execution will, in favour of a purchaser, deem the document to have been duly executed by the company (section 44(5), Companies Act 2006).
While there is no formal legal requirement for the above execution clauses to state the names of the company officers who are signing on behalf of the company, the names of the officers may be included in addition to their signatures to assist with identification of the officers for evidential purposes at a later date. However, where the deed is a transfer of registered land or other instrument whose form is prescribed, the Land Registry does not suggest inclusion of the names of the company officers in addition to their signature (see LR Practice Guide 08 - Execution of deeds, paragraph 4.2, but has indicated to PLC that it is unlikely to raise a requisition in relation this minor difference.
In relation to the first execution clause above, for the purposes of section 44(2)(a) of the Companies Act 2006, it is thought that execution by the single signature of a person who is both director and secretary would not suffice (Johnsey Estates (1990) Ltd v Newport Marketworld Ltd and Others, unreported).
A company can execute a deed in accordance with section 44(2) of the Companies Act 2006 (signatures of two authorised signatories or one director in the presence of a witness who attests the signature) even if the only method given in its articles for the execution of deeds is under the common seal.
Although there appears to be no legal authority on the point, some practitioners take the view that, in order to deal with the absence of a signatory to a deed, a two authorised signatories execution clause could be signed in counterpart (unlike the common seal clause which normally requires the presence of both directors when the seal is affixed (depending on a company’s articles of association)). For details of execution in counterpart.
Where a deed was signed by one authorised signatory before 6 April 2008 and by another on or after that date, it is treated as executed on or after 6 April 2008 and so section 44 of the Companies Act 2006 applies to it (paragraph 1(3), Part 1, Schedule 4, The Companies Act 2006 (Commencement No. 5, Transitional Provisions and Savings) Order 2007 (SI 2007/ 3495)).
The second execution clause above shows the company executing a deed by a single director signing the deed on its behalf. This clause makes use of the new method of execution introduced by section 44(2)(b) of the Companies Act 2006, but it will only be valid if the single director’s signature is made in the presence of a witness who attests the signature. Where the deed is a transfer of registered land or other instrument whose form is prescribed, the Land Registry requires the name of the witness to be stated in block capitals (see LR Practice Guide 08 - Execution of deeds, paragraph 4.2).
Where a deed is lodged for registration with the Land Registry which does not have the common seal affixed and purports to have been executed by signatories on behalf of the company who are other than a director and secretary or two directors, or a director whose signature is witnessed and attested, the Land Registry will require evidence to show that the deed had been duly executed (see LR Practice Guide 08 - Execution of deeds, paragraph 4.2).
Note that the use of the words "Executed as a deed..", in the above two clauses, follows the wording used in Forms D(i) (instruments executed by a company registered under the Companies Acts, or an unregistered company, without using its common seal) and D(ii) (instruments executed by a company registered under the Companies Acts, acting by a director) of Schedule 9 to the Land Registration Rules 2003 (as amended by the Land Registration (Amendment) Rules with effect from 10 November 2008). .
Execution by directors or secretaries on behalf of several companies
Where one of the signatories to a document is, for example, a director or secretary of a number of companies that are executing a deed (such as, where a parent and its subsidiaries are all required to execute a single mortgage debenture), it is not sufficient for that person to sign the deed only once. Signature of a document by a person on behalf of more than one company will not be taken to be duly signed by that person for the purposes of section 44 of the Companies Act 2006 unless the person signs it separately in each capacity (section 44(6), Companies Act 2006).
The Land Registry states that it is essential that the words of execution are drafted carefully otherwise it may require proof that the signatories have the relevant status within each company.
Executed as a deed by [NAME OF EACH EXECUTING COMPANY] by [NAME OF FIRST INDIVIDUAL SIGNING AS A DIRECTOR] being a director of each of the executing companies and [NAME OF SECOND INDIVIDUAL] being [a director OR the secretary] of each of the executing companies. | ............................... [SIGNATURE OF DIRECTOR OF FIRST EXECUTING COMPANY] |
| ............................... [SIGNATURE OF DIRECTOR OR SECRETARY OF FIRST EXECUTING COMPANY] |
| ............................... [SIGNATURE OF DIRECTOR OF SECOND EXECUTING COMPANY] |
| ............................... [SIGNATURE OF DIRECTOR OR SECRETARY OF SECOND EXECUTING COMPANY] |
It is also now possible, under section 44(2)(b) of the Companies Act 2006, for a single director of each executing company to execute a deed on behalf of several companies provided he signs the deed separately in each capacity and his signature is witnessed. For example:
Executed as a deed by [NAMES OF EACH EXECUTING COMPANY] acting by [NAME OF DIRECTOR] being a director of each of the executing companies, in the presence of: | ………………………….. [SIGNATURE OF DIRECTOR OF FIRST EXECUTING COMPANY] Director |
| ………………………….. [SIGNATURE OF DIRECTOR OF SECOND EXECUTING COMPANY] Director |
............................. [SIGNATURE OF WITNESS] [NAME, ADDRESS [AND OCCUPATION] OF WITNESS] |
|
|
At present, the Land Registry suggested form of execution for these purposes (as set out in LR Practice Guide 08 - Execution of deeds, paragraph 4.5), begins with the words "Signed as a deed...", whereas the above suggested clauses begin with the words "Executed as a deed..." in line with the prescribed execution clauses in Forms D(i) and D(ii) of the Land Registration Rules 2003 (as amended by the Land Registration (Amendment) Rules 2008), effective from 10 November 2008.
The Land Registry also suggests that the name of the witness should be stated in block capitals (see LR Practice Guide 08 - Execution of deeds, paragraph 4.5).
Execution where the director or secretary is also a company
Where a director or the secretary is itself a company it must act through the agency of a real person, who must be duly authorised. For the purposes of section 44 of the Companies Act 2006, a document is (or purports to be) signed by a director or secretary, in a case where that office is held by a firm, if it is (or purports to be) signed by an individual authorised by the firm to sign on its behalf (section 44(7), Companies Act 2006). A "firm" in this context means any entity, whether or not a legal person, that is not an individual and includes a body corporate, a corporation sole and a partnership or other unincorporated association (section 1173(1), Companies Act 2006).
For example, where it is one of the directors that is the corporate body and the deed is signed on behalf of the company in accordance with section 44(2)(a) of the Companies Act 2006:
Executed as a deed by [NAME OF EXECUTING COMPANY] acting by [NAME OF FIRST DIRECTOR], a director and [NAME OF INDIVIDUAL ACTING FOR THE CORPORATE DIRECTOR] duly authorised by [NAME OF CORPORATE DIRECTOR] to sign on its behalf as director of [EXECUTING COMPANY] |
|
| ............................... [SIGNATURE OF DIRECTOR] Director |
|
|
| ............................... [SIGNATURE OF INDIVIDUAL ACTING FOR THE CORPORATE DIRECTOR] On behalf of Director |
|
|
|
|
Alternatively, where there is a corporate director of the executing company, the deed may be signed on behalf of the executing company in accordance with sections 44(2)(b) and 44(7) of the Companies Act 2006, that is, by an individual authorised by the corporate director where the signature is made in the presence of a witness who attests the signature:
Executed as a deed by [NAME OF INDIVIDUAL ACTING FOR THE CORPORATE DIRECTOR] duly authorised by [NAME OF CORPORATE DIRECTOR] to sign on its behalf as director of [EXECUTING COMPANY] in the presence of: ............................. [SIGNATURE OF WITNESS] [NAME [IN BLOCK CAPITALS], ADDRESS [AND OCCUPATION] OF WITNESS] | ………………………………………. [SIGNATURE OF DIRECTOR] Director |
At present, the Land Registry suggested version of the above clause uses the words "Signed as a deed..." rather than "Executed as a deed..." (see LR Practice Guide 08 - Execution of deeds , paragraph 4.4). The words "Executed as a deed..." have been used above to conform more closely to the wording of the prescribed execution clauses in Forms D(i) and D(ii) of the Land Registration Rules 2003 (as amended by the Land Registration (Amendment) Rules 2008), effective from 10 November 2008.
Disposal of registered land in England and Wales: execution by Scottish companies registered under the Companies Acts
Section 4.6 of LR Practice Guide 08 - Execution of deeds states that the requirements for an effective disposition of registered land in England and Wales by a Scottish company (registered under the Companies Act 1985, the Companies Act 1989 or the Companies Act 2006) are the same as for English and Welsh companies. This is on the basis that:
In Land Registry's opinion, section 48 of the Companies Act 2006 is not relevant to a disposal of registered land situated in England or Wales; and
A Scottish company is not an overseas company for the purposes of the Overseas Companies Regulations 2009.
EXECUTION FORMALITIES: LIMITED LIABILITY PARTNERSHIPS
Before 1 October 2009, section 36A of the Companies Act 1985 applied to execution of documents by limited liability partnerships (LLPs) by virtue of the Limited Liability Partnership Regulations 2001 (SI 2001/1090) (article 12(1), The Companies Act 2006 (Commencement No. 5, Transitional Provisions and Savings) Order 2007 (SI 2007/3495)). (This was the case despite implementation of section 44 of the Companies Act 2006 for execution of documents by companies on or after 6 April 2009.)
From 1 October 2009, the execution provisions in the Companies Act 2006 apply to LLPs, as modified, under the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 (SI 2009/1804) (2009 Regulations).
From 1 October 2009, regulation 4 of the LLP Regulations 2009 (Formalities of doing business under the law of England and Wales or Northern Ireland) applies modified versions of sections 43 to 47 of the Companies Act 2006 to LLPs but states that the application of section 43 (LLP contracts) is without prejudice to section 6 of the Limited Liability Partnerships Act 2000, which states that every member of LLP is the agent of the LLP. Section 47 of the Companies Act 2006 (execution of deeds or other documents by attorney), as applied to LLPs, applies where the instrument empowering a person to act as an LLP's attorney is executed on or after 1 October 2009 (paragraph 2, Part 1, Schedule 1, 2009 Regulations ).
Regulations 5 to 7 of the 2009 Regulations apply sections 48 to 52 of the Companies Act 2006, as modified, to LLPs.
The execution clauses below are suggested execution clauses applicable for execution by LLPs on or after 1 October 2009.
Execution clause: simple contracts — LLPs
Signed by [NAME OF MEMBER] for and on behalf of [NAME OF LLP] | ............................... [SIGNATURE OF MEMBER] Member |
OR
Executed by [NAME OF LLP] | ............................... [SIGNATURE OF MEMBER] Member ................................. [SIGNATURE OF MEMBER] Member |
OR
Executed by [NAME OF LLP] acting by [NAME OF MEMBER], a member, in the presence of: ............................. [SIGNATURE OF WITNESS] [NAME, ADDRESS [AND OCCUPATION] OF WITNESS] | ............................... [SIGNATURE OF MEMBER] Member |
Drafting note: simple contracts - LLPs
A simple contract can be made by an LLP by writing under its common seal or on behalf of an LLP by any person acting under its authority (express or implied) (section 43, Companies Act 2006, as applied and modified by regulation 4, 2009 Regulations).
Whether or not the LLP is bound by the contract will depend, among other things, on the signatory's authority determined under common law agency principles and statutory provisions. Important contracts are likely to be executed by an LLP.
Execution by an LLP can be:
Under seal;
By signature of two members (as in the second execution clause above); or
By signature of one LLP member in the presence of a witness who attests his signature (as in the third execution clause above) (sections 44(1(a) and 44(2), Companies Act 2006, as applied and modified by regulation 4, 2009 Regulations).
There is no mandatory requirement for an LLP to adopt a common seal (section 45(1), Companies Act 2006, as applied and modified by regulation 4, 2009 Regulations). If an LLP does have a common seal, a document is duly executed by the affixing of that seal (section 44(1)(a), Companies Act 2006, as modified by regulation 4, 2009 Regulations). The alternatives are for a document to be expressed (in any form of words) to be executed by the LLP and to be signed on behalf of the LLP by either:
Two members of the LLP; or
A member of the LLP in the presence of a witness who attests the signature (section 44(2) Companies Act 2006, as applied and modified by regulation 4, 2009 Regulations).
Execution clause: deeds - LLPs
Executed as a deed by affixing the common seal of [NAME OF LLP] in the presence of: Member: ................................ Member: .............................. | [COMMON SEAL OF LLP] |
OR
Executed as a deed by [NAME OF LLP] acting by [NAME OF MEMBER], member and [NAME OF MEMBER], member | ................................ [SIGNATURE OF MEMBER] Member |
| ............................... [SIGNATURE OF MEMBER] Member |
OR
Executed as a deed by [NAME OF LLP] acting by [NAME OF MEMBER], a member, in the presence of: ............................. [SIGNATURE OF WITNESS] [NAME, ADDRESS [AND OCCUPATION] OF WITNESS] | ................................ [SIGNATURE OF MEMBER] Member |
Drafting notes: deeds - LLPs
Section 44(2) of the Companies Act 2006 applies, with modifications, to LLPs so that for an LLP not using a common seal, a deed may be signed on behalf of the LLP by two members of the LLP (as in the second clause above) or by one member in the presence of an attesting witness (as in the third clause above) (regulation 4, 2009 Regulations). The Land Registration (Amendment) Rules 2009 (SI 2009/1996) have amended the forms of execution clause for LLPs prescribed by rule 206(3) of and Schedule 9 to Land Registration Rules 2003 to include the form for use where the document is to be executed by an LLP acting by a single member (see Land Registry Practice Bulletin 18, Land Registration (Amendment) Rules 2009, Sept 2009).
Note that the prescribed forms of execution for LLPs under Land Registration Rules 2003 (as amended) do not require the name(s) of the member(s) to be stated in the text of the execution clause as set out in the execution clauses above and that they do require the name of the witness to be stated in block capitals.
In favour of a purchaser (which means a purchaser acting in good faith for valuable consideration) a document is deemed to have been duly executed by an LLP if it purports to be signed in accordance with section 44(2) of the Companies Act 2006 (as applied and modified by regulation 4, 2009 Regulations) (section 44(4), Companies Act 2006, as applied and modified by regulation 4, 2009 Regulations).
EXECUTION FORMALITIES: OVERSEAS COMPANIES
Before 1 October 2009, the execution of deeds (and other documents) by "foreign companies" (companies incorporated outside Great Britain) was governed by the Foreign Companies (Execution of Documents) Regulations 1994 (SI 1994/ 950) (as amended) (1994 Regulations), which adapted sections 36 and 36A of the Companies Act 1985 to the execution of documents (in accordance with the law of England and Wales) by foreign companies.
As the 1994 Regulations relied on section 36A of the Companies Act 1985, parts of which were repealed from 6 April 2008, a saving provision was included in regulation 7 of the Companies Act 2006 (Consequential Amendments etc) Order 2008 (SI 2008/948) (Consequential Amendments Order) to ensure that section 36A of the Companies Act 1985 still applied in this respect to execution by foreign companies before 1 October 2009. As section 44 of Companies Act 2006 applies to documents executed under the law of England and Wales or Northern Ireland from 6 April 2008, the Consequential Amendments Order also made clear that between 6 April 2008 and before 1 October 2009, section 36A of the Companies Act 1985, as adapted by the 1994 Regulations, did not apply to companies registered in Northern Ireland and instead section 44 of the Companies Act 2006 applied to execution by Northern Ireland companies.
The 1994 Regulations were revoked on 1 October 2009, together with the Foreign Companies (Execution of Documents) Regulations (Northern Ireland) 2003 (SR (NI) 2003 No.5) which had applied similar provisions under the law of Northern Ireland.
From 1 October 2009, The Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009 (SI 2009/1917) (2009 Regulations) apply to all overseas companies (whether or not they have registered an establishment in the UK) entering into contracts and documents under the law of England and Wales and Northern Ireland and, separately, under the law of Scotland. The 2009 Regulations adapt the execution provisions in sections 43, 44, 46 and 48 of the Companies Act 2006 for execution by overseas companies.
Under the 2009 Regulations, under the law of England and Wales or Northern Ireland, overseas companies may execute a document in one of three ways:
By affixing its common seal.
In any manner permitted by the laws of the territory in which the company is incorporated for the execution of documents by such a company.
By the signature of a person who, in accordance with the laws of the territory in which the overseas company is incorporated, is acting under the authority (express or implied) of the company and the document is expressed (in whatever form of words) to be executed by the company. (This method has the same effect as it would have in relation to a company incorporated in England and Wales or Northern Ireland if executed under the common seal of a company so incorporated ; and in favour of a purchaser, a document executed by an overseas company in this way is deemed to have been duly executed.)
(Section 44, Companies Act 2006, as modified by Regulation 4, 2009 Regulations.)
If foreign laws distinguish between deeds and other documents and require certain formalities for a deed, these formalities should be followed.
Execution clause: deeds — overseas companies
Executed as a deed by affixing the common seal of [NAME OF COMPANY] in the presence of: ................................................. [Director] ................................................. [SECRETARY OR OTHER PERMANENT OFFICER OF THE CORPORATION] | [COMMON SEAL] |
OR
Signed as a deed by [NAME OF COMPANY] acting by [NAME OF AUTHORISED SIGNATORY] [and [NAME OF AUTHORISED SIGNATORY] ] | ................................................. Authorised signatory |
| ................................................. [Authorised signatory] |
OR
Signed as a deed on behalf of [NAME OF COMPANY], a company incorporated in [TERRITORY], by [NAME[S] OF PERSON SIGNING], being [a] person[s] who, in accordance with the laws of that territory, [is OR are] acting under the authority of the company | ................................................. Authorised signatory |
| ................................................. [Authorised signatory] |
Drafting notes: deeds — overseas companies
The signature of one authorised signatory will be sufficient provided that the person is acting under the authority (express or implied) of the company in accordance with the laws of the territory in which the company is incorporated.
The first alternative is for use where the overseas company uses its common seal and follows the form for Companies Act companies. The word "deed" should be included as an instrument is not taken to satisfy the face-value requirement of a deed merely because it is executed under seal (section 1(2A), Law of Property (Miscellaneous Provisions) Act 1989).
The second alternative is a simple form. It is prudent to seek a legal opinion from lawyers in the jurisdiction in which the overseas company is incorporated as to whether the form of execution clause is appropriate. The opinion should also cover issues such as:
Whether those signing have authority to bind the company.
Whether there are other formalities to be complied with under the local law (which may at least be necessary to enforce the document in the company's place of incorporation).
Separate matters such as corporate capacity.
Where am overseas company executes in accordance with its local laws, the Land Registry will require evidence (usually a letter from a local lawyer) of due execution. The third alternative is the form required by the Land Registry in the case of a transfer of registered land, or other instrument whose form is prescribed, where the company executes under the third method mentioned above (see LR Practice Guide 08 - Execution of deeds, for the requirements of the Land Registry in relation to the execution of deeds relating to registered land).
EXECUTION FORMALITIES: NON-COMPANIES ACT CORPORATIONS
Simple contracts — non-Companies Act corporations
Any person with authority (express or implied) can contract on behalf of other types of corporation (such as local authorities, building societies and charities formed under the Charities Act 1993) wherever incorporated (Corporate Bodies Contracts Act 1960).
In practice, seals are commonly used by such corporations for simple contracts as well as deeds.
Deeds — non-Companies Act corporations
The execution of deeds by non-Companies Act corporations is governed by the common law, unless there are specific statutory provisions applicable to the corporation.
Subject to statutory provisions to the contrary, a deed is executed by affixing the common seal of the corporation accompanied by the formalities, if any, prescribed by its constitution (for example, its statute, charter or articles) and by delivery. It is necessary to ensure that the appropriate formalities are met in each case; for example:
Local authorities. There are no specific provisions in the Local Government Act 1972 governing the use of the seal although standing orders made by authorities frequently require the affixing of the authority's seal to be attested by the chairman, vice-chairman or other elected member, and also by the clerk or his or her deputy. Section 74 of the Law of Property Act 1925 applies to local authorities.
Building societies. The rules of a building society must provide for the form, custody and use of the society's common seal ( paragraph 3(4), Schedule 2, Building Societies Act 1986). Typically the rules might provide for the use of the seal to be countersigned by an officer approved by the board, and for execution to be recorded in the society's records. Section 74 of the Law of Property Act 1925 applies to building societies. See LR Practice Guide 08 - Execution of deeds, paragraph 6.3 and LR Practice Guide 31 - Discharges of charges, for the Land Registry's requirements in relation to the execution of deeds of discharge of a mortgage. Some charges over residential registered land are now discharged by the END system. See also LR Practice Guide 30 - Approval of mortgage documentation and LR Practice Bulletin 06 - Electronic discharges.
Unregistered companies. These include companies incorporated by royal charter or private Act of Parliament and certain insurance companies. The form of execution is governed by the company's constitution. Before 6 April 2008, it was clear that unregistered companies could also execute in the same form as a Companies Act company executes without use of a common seal (that is, by signature of a director and the secretary or by two directors) (Companies (Unregistered Companies) Regulations 1985 (SI 1985/680) and The Companies (Unregistered Companies) (Amendment No. 2) Regulations 1990 (SI 1990/1394)) . However, following the repeal of most provisions of section 36A of the Companies Act 1985 and the introduction of section 44 of the Companies Act 2006 on 6 April 2008, it was unclear whether SI 1985/680 (as amended) still applied and the Land Registry suggested that for deeds executed on or after 6 April 2008 (and before 1 October 2009), an unregistered company may execute deeds using its common seal in Form C, Schedule 9, LRR 2003 (see LR Practice Guide 08 - Execution of deeds (paragraph 5). From 1 October 2009, the Unregistered Companies Regulations 2009 (SI 2009/2436) allow unregistered companies to execute documents in accordance with section 44 of the Companies Act 2006.
EXECUTION FORMALITIES: UNINCORPORATED ASSOCIATIONS
Unincorporated associations have no distinct legal personality, rights or duties and are not capable of owning property. Property is therefore commonly vested in leading members as trustees on trust for the members. The terms of the trust are determined by the association's rules and extraneous evidence (Re Recher's Will Trusts [1972] Ch 526, and Re Bucks Constabulary Widows' and Orphans' Fund Friendly Society (No 2) [1979] 1 WLR 936).
Execution formalities applicable to trusts will therefore apply to the transfer of property
It is possible for a member or officer of an unincorporated association to contract on behalf of the corporation. Whether or not the contract can be enforced against other members of the association will depend on whether or not the person who made the contract had authority (express or implied) to do so.
EXECUTION FORMALITIES: PRIVATE TRUSTS
Simple contracts — private trusts
Simple contracts must be executed by all the trustees unless otherwise provided by the settlement, or directed by a competent court or unless the trustees, or any of them, have lawfully delegated their powers or appointed an agent attorney, nominee or custodian (sections 23 and 25, Trustee Act 1925, section 9 , Trust of Land and Appointment of Trustees Act 1996, Trustee Delegation Act 1999, and section 11 Trustee Act 2000). The manner of execution will follow from the legal form of the trustee.
Where there is more than one trustee, in order to bind the trust, all must join in the execution of the deed personally (Luke v South Kensington Hotel Ltd (1879) Ch D 121) unless the terms of the trust permit a majority to act, a competent court directs otherwise, or the power has been lawfully delegated (see above). It is necessary, therefore, to check the settlement and any power of attorney or appointment of an agent.
Signatures to a deed being executed by individuals, should be witnessed, (. Where the trustee is a corporation, it should execute in accordance with the necessary formalities for that corporation.
EXECUTION FORMALITIES: CHARITIES
Execution of deeds and other documents by charitable companies incorporated under the Companies Acts is governed by section 44 of the Companies Act 2006, in respect of documents executed on or after 6 April 2008.
Execution of deeds and other documents by a charitable body incorporated under the Charities Act 1993 is governed by section 60 of that Act, which provides for execution in one of three of the following ways:
The charity affixing its common seal (section 60(2), 1993 Act). The Land Registry will accept this form of execution if the common seal appears to have been affixed in the presence of appropriate officers of a charity so as to allow for the operation of section 74(1) of the Law of Property Act 1925. The attestation clause for the company using its common seal may be used and the description of those attesting the sealing adapted as appropriate (in respect of execution on or after 6 April 2008)).
Being signed by a majority of the trustees (defined as the people having the general control and management of the administration of the charity) and expressed to be executed by the charitable body (section 60(3)(a), 1993 Act).
Being signed by two or more of the trustees who have, subject to the trusts of the charity, been authorised by all the trustees, either generally or specifically (in the manner set out in section 60(5)) to execute documents in the name and on behalf of the body of trustees. (There are detailed provisions in section 60(5) as to the form of authority, for example that it may be exercisable by any of the trustees or by named trustees only, and covering any want of formality in the giving of the authority (section 60(3)(b), 1993 Act)).
Trustees of an unincorporated charity (where, typically, the trustees are individuals) are authorised by section 82 of the Charities Act 1993 to delegate execution of deeds or other documents to two or more of their number. In such a case there is a conclusive presumption of due execution under section 82(4) of the Charities Act 1993.
The Land Registry does not require evidence of the delegation if:
The disposition is for money or money's worth and there is no reason to doubt the good faith of the person in whose favour it is made; and
The deed states that it has been executed in pursuance of section 82 of the Charities Act 1993.
The following attestation clauses are recommended by the Land Registry for these purposes.
This [transfer] is executed by [NAME OF TRUSTEE] and [NAME OF TRUSTEE] being two of the registered proprietors of the land in this title as charity trustees and on behalf of all the charity trustees under a general authority given pursuant to section 82 of the Charities Act 1993. | ............................... [SIGNATURE OF TRUSTEE] ............................... [SIGNATURE OF TRUSTEE] |
OR |
|
Signed as a deed on behalf of the trustees [OR OTHER TERM USED IN THE DEED, FOR EXAMPLE, "TRANSFERORS"] by [NAME OF THE TRUSTEES SIGNING], [two OR [OTHER NUMBER]] of their number, under an authority conferred pursuant to section 82 of the Charities Act 1993 in the presence of: | ............................... [SIGNATURE OF TRUSTEE] ............................... [SIGNATURE OF TRUSTEE] Authorised signatories |
|
|
................................ [SIGNATURE OF WITNESS] [NAME, ADDRESS [AND OCCUPATION] OF WITNESS] |
|
In the second clause above, the Land Registry recommends that the name of the witness is stated in block capitals.
See also LR Practice Guide 08 - Execution of deeds, paragraph 9.1 and LR Practice Guide 14 - Charities for Land Registry requirements in relation to the transactions involving charities.
EXECUTION FORMALITIES: ATTORNEYS UNDER A POWER OF ATTORNEY
A power of attorney is a deed by which one party (the donor) gives another person (the attorney) the power to act on behalf of and in the name of the donor. It may be a general power or a power limited to certain defined purposes. Powers of attorney are subject to statutory rules set out in the Powers of Attorney Act 1971 (as amended), the Mental Capacity Act 2005 (for existing enduring powers of attorney and for lasting powers of attorney), section 25 of the Trustee Act 1925 (as amended by the Trustee Delegation Act 1999) and the Trusts of Land and Appointment of Trustees Act 1996 (which apply to trustees).
This note deals with general powers of attorney under the Powers of Attorney Act 1971
An authority to execute a deed on behalf of another person must generally be given by deed (Steiglitz v Eggington (1815) Holt 141 and Powell v London & Provincial Bank (1893) 2 Ch 555). This deed will be a power of attorney.
The ability of a corporation to grant a power of attorney to execute a deed on its behalf depends on whether it has power to do so under its constitution. Most companies formed and registered under the Companies Acts will generally have an express power in their articles of association to make such an appointment.
The effect of the law under the Law of Property (Miscellaneous Provisions) Act 1989, the Companies Act 2006 and the Powers of Attorney Act 1971 means that:
Where an individual signs a deed by way of execution (whether on his or her own behalf or on behalf of another) he or she must comply with the formalities contained in section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 by signing in the presence of a witness who attests the signature. Where an individual is acting on behalf of a corporation, there had been confusion over whether the individual attorney should write his or her own name or that of the corporation for whom he or she is acting. Section 1(4) of the Law of Property (Miscellaneous Provisions) Act 1989 provides expressly that "signing" the deed includes an individual signing either the name of the person or party on whose behalf he or she executes the document, or signing his or her own name; and section 1(2)(b) provides that an instrument may be a deed if validly executed as a deed in the name or on behalf of one or more of the parties. Section 7(1) and 7(1A) of the Powers of Attorney Act 1971 allows an individual attorney executing a deed on behalf of a corporate donor to execute the deed as the donor would in accordance with section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989.
Where a company executes a deed (whether on its own behalf or on behalf of another), on or after 6 April 2008, it must execute in accordance with section 44 of the Companies Act 2006 (by use of the common seal, by signature of a director and secretary or two directors, or by signature of one director in the presence of a witness who attests the signature); and the respective rebuttable presumptions of deemed execution in favour of a purchaser under sections 44(5) of the Companies Act 2006 and section 74(1) of the Law of Property Act will apply where a company executes a document on behalf of another person (section 44(8), Companies Act 2006 and section 74(1A), Law of Property Act 1925).
Where a deed has been executed under a power of attorney and it is lodged with the Land Registry for registration, the Land Registry requires the deed to be accompanied by either Form 1 (the prescribed form of power of attorney under the 1971 Act), the original power, or a sufficient copy of any power relied on to establish that a document lodged with the application is validly executed (see LR Practice Guide 08 - Execution of deeds, paragraph 10.1).
From 1 October 2009, the Companies Act 2006 has made some minor changes to the law on companies appointing an attorney under a power of attorney. Under section 47 of the Companies Act 2006 (Execution of deeds or other documents by attorney), a company may, by instrument executed as a deed, empower a person, either generally or in respect of specified matters, as its attorney to execute deeds or other documents on its behalf, and a deed or other document executed by the attorney, whether in the UK or elsewhere, will have the same effect as if executed by the company. This means that a company may appoint an attorney whether or not it has a common seal. Section 47 changes the previous law under section 38 of the Companies Act 1985, as section 38 was limited only to the execution of deeds abroad, rather than in the UK.
Section 47 of the Companies Act 2006 applies where the power appointing someone to act as the company's attorney was executed on or after 1 October 2009. Section 38 of the Companies Act 1985 continues to apply to powers conferred before 1 October 2009 (paragraph 16, Schedule 2, Companies Act 2006 (Commencement No. 8, Transitional Provisions and Savings) Order 2008).
For further details of the changes made to the law on execution under the Companies Act 2006
Execution clause: simple contracts — attorneys
Signed by [NAME OF ATTORNEY] as attorney for |
|
[NAME OF DONOR] | ............................... |
under a power of attorney dated [DATE] | Attorney for [NAME OF DONOR] |
Drafting notes: simple contracts — attorneys
The clause follows the form of execution for an individual with a reference to the donor and the power under which the attorney was appointed.
Execution clause: deeds — individual attorney
Signed as a deed by [NAME OF ATTORNEY] as attorney for [NAME OF DONOR] under a power of attorney dated [DATE] in the presence of: |
|
| .............................. [SIGNATURE OF ATTORNEY] as attorney for [NAME OF DONOR] |
..................................... |
|
[SIGNATURE OF WITNESS] |
|
[NAME, ADDRESS [AND OCCUPATION] OF WITNESS] |
|
Drafting notes: deeds — individual attorney
The above form can be used where the donor is an individual or corporation and where the attorney is an individual.
Where a deed is executed by an individual (here, the attorney), the signature should be witnessed (and the deed delivered) to comply with section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989.
An attorney with authority to execute a deed has authority to deliver it on behalf of the donor and the statutory presumptions about execution in sections 44(5) of the Companies Act 2006 (in favour of a purchaser), section 36AA of the Companies Act 1985 (before 1 October 2009) or section 46 of the Companies Act 2006 (on or after 1 October 2009) (about delivery deemed to take place on execution). and section 74(1) of the Law of Property Act 1925 apply where execution is by an attorney (section 44(8), Companies Act 2006 and section 74(1A), Law of Property Act 1925).
A frequently asked question is whether the attorney should sign in his or her own name or the name of the donor of the power. Under sections 7(1) and 7(1A) of the Powers of Attorney Act 1971 it is possible for individuals to execute a deed in their own name or in the name of the donor. These sections allow an attorney to execute any instrument with his or her own signature and do any other thing which he or she has the donor's authority to do in his or her own name; those acts will be as effective as if done by the donor itself. The signature should be witnessed in accordance with section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989.
Where the donor is a company, the attorney can execute a conveyance of property by signing the name of the corporation in the presence of one or more witnesses who attest the signature (section 74(3), Law of Property Act 1925). (For these purposes, "property" includes any thing in action and any interest in real or personal property. "Conveyance" includes a mortgage, charge, lease, assent or vesting declaration).
See also LR Practice Guide 08 - Execution of deeds, paragraph 10, for the Land Registry's requirements on execution by attorneys, including attorneys appointed under trustee powers and LR Practice Guide 09 - Powers of attorney and registered land. Note that the Land Registry suggests that the name of the witness should be stated in block capitals in the execution provisions.
Execution clause: deeds — corporate attorney
Executed as a deed by affixing the common seal of [NAME OF CORPORATE ATTORNEY] as attorney for [FULL NAME OF DONOR INDIVIDUAL OR CORPORATION] [under a power of attorney dated [DATE]] in the presence of: | [COMMON SEAL] |
......................................... [SIGNATURE OF DIRECTOR] Director |
|
......................................... [SIGNATURE OF DIRECTOR OR SECRETARY] [Director OR Secretary] |
|
OR
Signed as a deed by [NAME OF CORPORATE ATTORNEY] acting by [NAME OF DIRECTOR] a director and [NAME OF DIRECTOR OR SECRETARY] [a director OR the secretary] as attorney for and on behalf of [FULL NAME OF DONOR INDIVIDUAL OR CORPORATION] [under a power of attorney dated [DATE]] | ............................... [SIGNATURE OF DIRECTOR] Director |
| .............................. [SIGNATURE OF DIRECTOR OR SECRETARY] [Director OR Secretary] |
OR |
|
Signed as a deed by [NAME OF CORPORATE ATTORNEY] acting by [NAME OF DIRECTOR], a director, as attorney for and on behalf of [FULL NAME OF DONOR INDIVIDUAL OR CORPORATION] [under a power of attorney dated [DATE]] in the presence of: ……………………………………………. [SIGNATURE OF WITNESS] [NAME, ADDRESS [AND OCCUPATION] OF WITNESS] | …………………………. [SIGNATURE OF DIRECTOR] Director |
OR
Signed as a deed in the name and on behalf of [NAME OF DONOR] by [NAME OF OFFICER], an officer appointed for the purpose by the board of directors of [NAME OF CORPORATE ATTORNEY] [his OR her OR its] attorney[, under a power of attorney dated [DATE]] in the presence of: |
|
| ...................................... [NAME OF DONOR] by [his OR her OR its] attorney [NAME OF ATTORNEY] acting by [NAME OF OFFICER] |
....................................... [SIGNATURE OF WITNESS] |
|
[NAME, ADDRESS [AND OCCUPATION] OF WITNESS] |
|
Drafting notes: deeds — corporate attorney
Section 7(1) of the Powers of Attorney Act 1971 covers attorneys who are not individuals.
It is common practice for a corporate attorney to execute a deed in the manner appropriate to the attorney corporation. On or after 6 April 2008, a company therefore executes on the donor's behalf:
Under its own common seal (see the first alternative clause above);
By the signature of two authorised signatories (that is, two of its directors or a director and secretary (in accordance with section 44(2)(a) of the Companies Act 2006) (see the second alternative clause above); or
By the signature of a single director in the presence of a witness who attests the signature (in accordance with section 44(2)(b) of the Companies Act 2006) (see the third alternative clause).
Note the first alternative clause above can be tailored for the attestation of the seal by either one director and the company secretary, or by two directors; this takes account of the fact that section 74(1) of the Law of Property Act 1925 provides protection for a purchaser where the seal is affixed in the presence of and is attested by a director and the secretary or two directors.
The Law of Property Act 1925 provides a statutory alternative in the case of conveyances of property. A corporation that has authority under a power of attorney to convey an interest in property in the name of or on behalf of the donor (including another corporation) may rely on section 74(4) of the Law of Property Act 1925. This means that the instrument may be executed by it being signed, in the name of the donor, by an officer appointed for that purpose by the board of directors, council or other governing body of the attorney corporation and it is so signed in the presence of a witness who attests the signature (see the fourth alternative clause above).
See also LR Practice Guide 08 - Execution of deeds, paragraph 10.5 and LR Practice Guide 09 - Powers of attorney and registered land for the Land Registry requirements, which include the recommendation that the name of any attesting witness is stated in block capitals.
EXECUTION FORMALITIES: LIQUIDATORS
A liquidator has power under the Insolvency Act 1986 to "do all acts and execute, in the name and on behalf of the company, all deeds, receipts and other documents and for that purpose to use, when necessary, the company's seal" (sections 165 and 167 and paragraph 7, Schedule 4, Insolvency Act 1986). On the making of a liquidation order, the powers of the company's directors cease and they no longer have the power to execute documents on behalf of the company. Instead, only the liquidator can do so.
The safest way for a liquidator to execute a document is to affix the common seal and sign to attest it. But liquidators often execute simple contracts by signing in the name and on behalf of a company in the same way that an authorised director or officer of the company would.
If the company has no seal or the seal has been lost, the manner of execution is less certain because of the words "for that purpose to use".
The Law Commission had recommended that Schedule 4 to the Insolvency Act 1986 should be amended to clarify that the power of a liquidator to execute a deed or other document in the name and on behalf of the company is separate from the power to use the company's seal, but this amendment has not been made.
In the meantime, the more cautious view is that the only way for a liquidator to execute a deed or other document is by having the company's seal affixed to it in the presence of the liquidator. Nevertheless liquidators sometimes sign deeds in the name of the company. Supporters of the latter approach argue that if Schedule 4 to the Insolvency Act 1986 was intended to require a liquidator to use a seal in all circumstances, it would be expected to say ".. and for that purpose shall use....the company's seal".
The Land Registry takes the view that a liquidator may sign a document as a deed without use of the seal (Schedule 4, Insolvency Act 1986 andsection 74(3), Law of Property Act 1925) and see LR Practice Guide 08 - Execution of deeds , paragraph 8.5 and see LR Practice Guide 35 - Corporate insolvency for general information on Land Registry requirements for transactions involving liquidators.
In any event, the document should be expressed to be a deed, and it is necessary to check whether the contract itself comes within the liquidator's powers and whether any sanction is necessary before the power can be exercised.
Execution clause: deeds — liquidator (using a common seal)
Executed as a deed by affixing the common seal of [NAME OF COMPANY] (in liquidation) in the presence of: | [COMMON SEAL OF COMPANY] |
..................................... Liquidator [SIGNATURE OF LIQUIDATOR] |
|
Drafting notes: deeds — liquidator (using a common seal)
This form of execution will not be in accordance with the company's articles of association but there is no objection to this because the power is conferred by statute.
Execution clause: deeds — liquidator (without using a common seal)
Signed as a deed by [NAME OF COMPANY] (in liquidation) acting by [NAME OF LIQUIDATOR] its liquidator under powers conferred on [him OR her] by Schedule 4 to the Insolvency Act 1986 in the presence of: | ................................................. [NAME OF COMPANY] by [ SIGNATURE OF LIQUIDATOR], its liquidator |
.......................... [SIGNATURE OF WITNESS] |
|
[NAME, ADDRESS [AND OCCUPATION] OF WITNESS] |
|
Drafting notes: deeds — liquidator (without using a common seal)
It may be that the liquidator's signature in the above example does not have to be witnessed as it is arguable that the deed is executed by the company and not the liquidator. There is some doubt about this and therefore the signature should be witnessed and this is the format recommended by the Land Registry.
In the above example, the liquidator should sign the name of the company and then his or her own name, for example, "X Limited by John Smith, its liquidator".
A liquidator making a contract on behalf of the company acts as agent for the company and there is no presumption that the liquidator is acting in his or her personal capacity (Stead Hazel & Co v Cooper [1933] 1 KB 840). Nevertheless, it is prudent to include an express statement that the liquidator is acting in a representative capacity.
Where joint liquidators have been appointed, the appointment should be checked for their power to act severally, otherwise they will be required to act together.
EXECUTION FORMALITIES: ADMINISTRATORS
Execution clause: deeds — administrators
Executed as a deed by affixing the common seal of [NAME OF COMPANY] (in administration) in the presence of: | [COMMON SEAL OF COMPANY] |
............................... Administrator |
|
OR |
Signed as a deed by [NAME OF COMPANY] (in administration) by [NAME OF ADMINISTRATOR], its administrator, pursuant to powers conferred under the Insolvency Act 1986 in the presence of: | ............................... [SIGN IN NAME OF THE COMPANY AND THE ADMINISTRATOR], its administrator |
........................... [SIGNATURE OF WITNESS] [NAME, ADDRESS AND [OCCUPATION] OF WITNESS] |
|
Drafting notes: deeds — administrators
The appointment of an administrator to a company takes the management of the affairs, business and property of a company out of the hands of its directors. Therefore, once a company is in administration, it is the administrator not the directors who has the power to execute documents on behalf of the company.
Administrators have a statutory power to use the company's seal and to do all acts and to execute in the name and on behalf of the company any deed, receipt or other document (paragraphs 59 to 64, Schedule B1, Insolvency Act 1986 and Schedule 1, Insolvency Act 1986 (particularly paragraphs 8 and 9)).
The powers of an administrator to execute documents and to use the company seal are clearly not interdependent. Unlike liquidators, administrators are clearly given separate powers to use the company seal and to execute documents. An administrator may therefore execute a deed on behalf of a company either by having the company's seal affixed to it in his or her presence or by signing the deed in the name of the company. It follows that the forms of deed executed by an administrator are similar to those executed by a liquidator.
In the second of the above clauses, the Land Registry recommends that the name of the witness be stated in block capitals.
The Land Registry will accept either of the above forms of execution clause but will require evidence of the administrator's appointment to be lodged unless the appointment is already noted on the register, see LR Practice Guide 08 - Execution of deeds, paragraph 8.2, and see LR Practice Guide 36 - Administration and Receivership for the Land Registry's requirements in relation to transactions involving administrators generally.
While administrators are deemed to be acting as the agent of the company and not in their personal capacity (paragraph 69, Schedule B1, Insolvency Act 1986), it is prudent to express the capacity in which the administrator is executing the document or deed.
While it would be prudent to ascertain that the administrator is acting within his or her powers, paragraph 59(3) of Schedule B1 to the Insolvency Act 1986 gives protection to third parties dealing with an administrator in good faith and for value by stating that such a person is not concerned to enquire whether the administrator is acting within his or her powers.
Note that there are two ways for an administrator to be appointed: by an order of the court, or by filing a notice of appointment with the court using the out-of-court route introduced by the Enterprise Act 2002. The second execution clause above may be amended to provide for the method of appointment of the administrator concerned.
EXECUTION FORMALITIES: ADMINISTRATIVE RECEIVERS
Execution clause: deeds — administrative receivers
Executed as a deed by affixing the common seal of [NAME OF COMPANY] in the presence of: | [COMMON SEAL OF COMPANY] |
............................... Administrative receiver |
|
OR
Signed as a deed by [NAME OF COMPANY] by [NAME OF ADMINISTRATIVE RECEIVER], its administrative receiver, appointed under a debenture dated [DATE] in favour of [NAME OF LENDER] in the presence of: |
|
................................................ [SIGNATURE OF WITNESS] | ................................ [SIGN IN NAME OF THE COMPANY AND ADMINISTRATIVE RECEIVER], its administrative receiver |
[NAME, ADDRESS [AND OCCUPATION] OF WITNESS] |
|
|
|
Drafting notes: deeds — administrative receivers
The powers of an administrative receiver are deemed to include the powers contained in Schedule 1 to the Insolvency Act 1986, unless the statutory powers are inconsistent with the debenture by virtue of which he was appointed (section 42(1), Insolvency Act 1986). Therefore, unless excluded by the terms of the debenture, an administrative receiver rather than the directors has the power to execute deeds and other documents for and on behalf of the company (paragraphs 8 and 9, Schedule 1, Insolvency Act 1986).
Like an administrator, the powers of an administrative receiver to execute documents and to use the company seal are not interdependent and an administrative receiver may therefore execute a deed on behalf of a company either by affixing the company's seal in his or her presence or by signing the deed in the name of the company.
In the second clause above, the Land Registry recommends that the name of the witness is stated in block capitals.
The Land Registry will accept either of the above forms of execution clause, see, paragraph 8.4 and LR Practice Guide 36 - Administration and Receivership, on the Land Registry's requirements in relation to transactions with administrative receivers in general.
An administrative receiver is deemed to be the agent of the company (section 44(3), Insolvency Act 1986) but, unlike liquidators and administrators, is personally liable on contracts it enters into during the receivership unless otherwise provided by the contract (section 44(1)(b), Insolvency Act 1986). Personal liability is almost invariably excluded in the contract but the execution clause may also refer to the exclusion of personal liability by use of the words "as agent and without personal liability".
For an overview of administrative receivership, including changes made by the Enterprise Act 2002.
EXECUTION FORMALITIES: OTHER RECEIVERS
The powers of other receivers are derived entirely from the instrument under which they are appointed and the formalities of execution may be affected by the terms of that instrument. If they have the power to enter into simple contracts under the instrument, then they may do so by signing for and on behalf of the company.
A receiver is usually expressly deemed to be the agent of the company or mortgagor/chargor and is personally liable on contracts it enters into unless such liability is expressly excluded (section 37(1)(a), Insolvency Act 1986).
Execution clause: deeds — receivers
Signed as a deed by [NAME OF COMPANY] by [NAME OF RECEIVER], its receiver, pursuant to powers granted to [him OR her] by clause [RELEVANT CLAUSE NUMBER(S)] of a debenture dated [DATE] in favour of [NAME OF LENDER] in the presence of: | ......................................... [SIGN IN NAME OF COMPANY AND RECEIVER'S OWN NAME] |
......................................... [SIGNATURE OF WITNESS] |
|
[NAME, ADDRESS [AND OCCUPATION] OF WITNESS] |
|
Drafting notes: deeds — receivers
Debenture holders can appoint a receiver under section 101(1)(iii) of the Law of Property Act 1925 unless a contrary intention is expressed. Such a receiver has no statutory power to execute on behalf of the company.
However a debenture will usually contain an express power to appoint a receiver and give the receiver the right to sell or otherwise dispose of the company's property, with the power to execute in the name and on behalf of the company.
The Land Registry recommends that the name of the witness is given block capitals in the above execution clause.
See LR Practice Guide 08 - Execution of deeds , para 8.3, and LR Practice Guide 36 - Administration and Receivership on the Land Registry's requirements in relation to transactions involving receivers generally.
