Against the backdrop of COVID-19, social distancing is encouraged, and physical gatherings are being minimized. However, business have to keep going – documents have to get executed and meetings have to be held. Working from home has become a common arrangement. The article summarizes what you need to know in order to keep the business running amid COVID-19 given the new norms of adopting virtual execution of documents, conducting virtual meetings and allowing employees to work from home.
I. VIRTUAL EXECUTION OF DOCUMENTS
Generally speaking, subject to exceptions and certain requirements, documents may be executed with electronic and digital signatures.
1. Types of Signatures
(i) Electronic Signature
An electronic signature needs not take any specific format, and can take the form of an acknowledging agreement via email or a Jpeg image attached to the document.
(ii) Digital Signature
A signature associated with the signatory supported by a valid certificate issued by a recognized certification authority. Where the transaction involves a government entity, if virtual signature is to be used, it must take the form of digital signature.
2. Requirements of a Valid Electronic Signature
(i) Mainland China
- the creation data of the electronic signature is owned exclusively by the electronic signatory;
- the creation data of the electronic signature is controlled only by the electronic signatory when signing;
- any alteration to the electronic signature, to content or form of the data message after signing can be tracked.
- *Creation data refers to the characters and codes that are used in the course of the electronic signature and that reliably connects the electronic signature with the electronic signatory.
- *Note: Jpeg images ae not recognized as valid electronic signatures, and should be avoided. Email exchange of scanned documents with wet-ink signatures followed by delivery of originals and electronic signatures are preferable.
(ii) Hong Kong
- the signature must be used for the purpose of identification and indicating the authentication or approval of the information in the electronic record;
- the method of signing should be reliable and appropriate for the purpose for which the information is communicated;
- there must be consent by the recipient to the use of such signature.
3. Documents that May Not be Executed by Virtual Signatures
(i) Mainland China
Documents transferring interest in immoveable property and documents that have to be filed or registered with government authorities, documents concerning personal relationships e.g. marriage, adoption and succession generally require wet-ink signatures.
(ii) Hong Kong
Similarly, conveyancing documents relating to land, affidavits and statutory declarations, documents that have to be stamped or endorsed under the Stamp Duty Ordinance, e.g. share transfer documents, tenancy agreements and leases, as well as powers of attorney and certain trust and testamentary documents cannot be virtually executed.
4. Key Points to Note when Considering Virtual Execution
(i) Documents involving foreign parties
Where the document is to be signed by a signatory in foreign countries, foreign laws on virtual signature should be considered. Further, electronic signatures may not be accepted by notary public. Virtual signature is best avoided if foreign parties are involved.
(ii) Documents the execution of which required witnessing
The law is unclear as to whether witnessing by video-conferring or similar means are valid. It is best to avoid virtual signature where there is a witnessing requirement.
(iii) Deeds relating to matters other than land
While deeds not relating to land are not excluded explicitly from being executed virtually, it is advisable to insist on execution by wet-ink signature due to uncertainty in the area of law and the grave consequences of improper execution.
II. VIRTUAL MEETINGS
A company’s conduct of business involves the holding of general meetings of the shareholders and meetings of the board of directors.
(i) Mainland China
Subject to the company’s articles, companies may hold general meetings and directors’ meetings virtually. However, care must be taken to verify the identity of each attendee and record must be kept of the same.
(ii) Hong Kong
Subject to the company’s articles, companies may hold general meetings in different venues, so long as shareholders are able to listen, speak and vote in the meeting. However, according to the Companies Ordinance, there should be at least one physical venue for the meeting.
Subject to the company’s articles, directors’ meetings can be held entirely electronically e.g. by teleconference and video conferencing
Written Resolutions as an Alternative
In both Mainland China and Hong Kong, generally speaking, companies may get matters approved by way of written resolutions signed by directors and shareholders.
III. WORKING FROM HOME
Working from home arrangement entails risks of data leakage: personal devices such as personal computers and phones may be used, home and public networks are often less secure than that of the companies with sophisticated security setups, and physical documents may be taken to employees’ homes or even to coffee shops. Confidential information are therefore vulnerable to unintended disclosure and leakage. To minimize risks of breaching the duty of confidentiality owed to clients or partners and prevent trade secrets from being leaked, companies should consider putting in place the following cybersecurity policies:-
- Provide training to employees with regards data security and protection of confidential information;
- Install firewall on employees’ devices which may be used during work-from-home;
- Implement IT policies covering standard on password complexity, modus of using cloud sharing software and websites and doing back-up and encryption of emails and documents involving confidential information;
- Maintain system for tracking data usage and storage and conduct regular auditing to identify defaults;
- Include disclaimers on IT security issues on emails and contracts.
IV. CAN COMPANIES COMPEL THEIR EMPLOYEES TO GET VACCINATED?
In both Mainland China and Hong Kong, getting COVID-19 vaccination is not mandatory, and thus dismissing an employee due to his/her failure to get vaccination will likely be considered unlawful.
That said, companies can adopt incentive schemes to encourage employees to get vaccinated, such as granting leave for employees to get vaccinated and extra time for the employees to rest after getting vaccinated.
COVID-19 persists, yet business must go on. Despite the difficulties and challenges, there are indeed ways to keep business running. If in doubt, do seek legal advice to ensure that the new ways of getting things done are in compliance with the local laws and regulations.