Companies around the world have adopted work from home policies due to the recent pandemic, making it more difficult to sign documents in person. However, evolving technologies have made completing business contracts or agreements online more convenient and thus resulted in increased use of electronic and digital signatures.
This guide will discuss the legality of electronic & digital signatures in Hong Kong and which documents still require a traditional wet signature.
What is an electronic & digital signature?
According to the Electronic Transactions Ordinance, a digital signature means an electronic signature of the signer generated by the transformation of the electronic record using an asymmetric cryptosystem and a hash function such that a person having the initial untransformed electronic record and the signer’s public key can determine:
- Whether the transformation was generated using the private key that corresponds to the signer’s public key
- Whether the initial electronic record has been altered since the transformation was generated
An electronic signature (e-signature) means any letters, characters, numbers or other symbols in the digital form attached to or logically associated with an electronic record and executed or adopted for the purpose of authenticating or approving the electronic record.
Legality of the digital and electronic signatures
For a digital signature and e-signature to be valid and enforceable under the ETO, it must satisfy the following requirements (section 6):
- Digital signature:
- Supported by a recognised certificate
- Generated within the validity of that certificate
- Used in accordance with the terms of that certificate
- The first-mentioned person uses a method to attach the e-signature to or logically associate the e-signature with an electronic record for the purpose of identifying himself and indicating his authentication or approval of the information contained in the document in the form of the electronic record.
- Having regard to all relevant circumstances, the method used is reliable and is appropriate for the purpose for which the information contained in the document is communicated.
- The second-mentioned person consents to the use of the method by the first-mentioned person.
There is no specific form for the e-signature, but it usually is a typed name or a digital image of a handwritten signature, or a unique digital fingerprint using an online-signature tool.
If the contract involves a government agency, the digital signature must be supported by a recognised digital certificate issued by a Certification Authority.
Documents that can be signed with an e-signature
Documents that can be signed with an e-signature include:
- Employment contracts
- Commercial agreements between corporate entities (invoices, NDAs, purchase orders)
- Procurement documents
- Sales agreements
- Consumer agreements
- Lease agreements
- Purchase and sale contracts
- Software license agreements
- Copyright, patent and trademark licenses
- Transfers of intangible property
Documents that cannot be signed with an e-signature
According to the ETO, the following documents must be signed with a wet signature:
- Will, codicil or other testamentary documents
- Power of attorney
- Documents that are subject to stamp duty
- Government conditions for the land of land and/or government leases
- Any deed, conveyance or other documents or instrument in writing, judgements and lis pendens referred to in the Land Registration Ordinance (Cap.128) by which any parcels of ground tenements or premises in Hong Kong may be affected
- Any assignment, mortgage or legal charge or any other contract relating to or affecting the disposition of immovable property or an interest in immovable property
- A document affecting a floating charge as referred to in section 2A of the Land Registration Ordinance
- Oaths and affidavits
- Statutory declarations
- Judgements or orders of the court
- A warrant issued by the court or a magistrate
- Negotiable instruments
In summary, digital signatures are used to secure a document by encrypting the information, while an e-signature is similar to a handwritten one used to verify documents digitally. Both are valid in Hong Kong, however, they must meet requirements under the ETO and can only be used for certain documents.
If you have any questions regarding electronic & digital signatures or wider corporate governance of your business in Hong Kong, feel free to contact Acclime.
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