Signing deeds and documents the law clarified

On 15 September 2005, changes were made to the law of execution of deeds and documents by bodies corporate by the Regulatory Reform (Execution of Deeds and Documents) Order 2005 ("RRO"). The changes resolve existing uncertainties with the law and align the law more with common practice for executing documents. A summary of the changes is set out below. As a result of the RRO, practice and clauses for executing documents will not change substantially, although in three cases (see paragraphs 2, 4 and 8 of this note) practice will be made easier for those practitioners who may have taken a particularly cautious approach in the past. Now that the law has been clarified, in-house counsel should review their internal procedures and standard clauses for executing documents to ensure they comply. These are the main changes introduced by the RRO: 1.

Director/secretary signing for more than one company

One of the ways a company may sign a document is by a director and the secretary or by two directors of the company under section 36A Companies Act 1985. When signed in this way it has effect as if executed under the company's common seal and there is also presumption in favour of a purchaser of "due execution". The RRO has made it clear that where a person is signing in this way as a director or secretary of more than one company, they should sign it separately for each company that is a party to the document. This is likely to be particularly relevant where different companies in a group are party to a document and have directors or the secretary in common.

2.

Corporate officer
If a company signs as in 1, it was not previously clear how a director or secretary who was not an individual (e.g. one who was a company) could sign. The document will now be regarded as signed by that corporate director/secretary if it is (or purports to be) signed by an individual authorised by the director or secretary to sign on its behalf. If you rely on this section you should ask to see a board minute evidencing the authority by which the individual signs on behalf of the director or secretary.

3.

Deed to say that it is a deed

One of the requirements for a document to be executed as a deed is that it make clear on its face that it is a deed. There was a view, however, that if a document was executed under seal, it did not need to describe itself as a deed if it was a document which was by its nature one that had to be executed as a deed (e.g. this lease) and it was in fact executed under seal. The RRO amends the Law of Property (Miscellaneous Provisions) Act 1989. It now provides that a document shall not be taken to make clear on its face that it is a deed merely because it is executed under seal. Therefore simply stating that the common seal was affixed in the presence of a director/secretary does not necessarily mean that the document is a deed. There needs to be clear wording on the document to the effect that the document is a deed. This is often done in the introductory wording to the document (for example "This Deed is made on [date]"); in the
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testimonium clause (for example "This deed has been executed and delivered by or on behalf of the parties on the date on page [ ]") or in the execution clauses or some or all of those options. The Land Registry has amended the execution wording for Land Registry documents where a common seal is used so they now refer to being executed as a deed.

4.

Signing in advance of completion: presumption of delivery of a deed

For a deed to be effective it must be delivered it has effect immediately from being unconditionally delivered. Delivery is the point in time at which the party evinces an intention to be bound. As such, it is a distinct step from execution. However, prior to the changes introduced by the RRO there were two presumptions that delivery had taken place: a rebuttable presumption that a deed executed by a company is delivered upon being executed - this presumption applies irrespective of whether execution is under seal or by the signatures of two directors/director and secretary (old section 36A(5), now section 36AA Companies Act 1985); an irrebuttable presumption that a deed was deemed to be delivered on its execution where there was a purchaser in good faith and the deed had been signed by people purporting to be two directors or director and secretary of the company (old section 36A(6) Companies Act 1985).

Because the second presumption was not rebuttable, problems arose where a document was signed in advance of completion. This resulted in work -arounds such as obtaining a power of attorney for someone who would be available to sign at the relevant time. These will no longer be necessary. However, you should nevertheless note that there is still a rebuttable presumption of delivery so it will continue to be important to ensure that if the parties do not want the deed to have immediate effect on execution (e.g. a document is signed in advance of completion), they must prove contrary intention. This is usually done by taking both of the following steps: drafting the testimonium and execution clauses so as to make clear that delivery takes place when the document is dated rather than at its earlier execution (for example, by amending the wording to read "Delivered as a deed on the date of the deed"); and keeping a careful board minute recording that the document is not to have effect on execution but that delivery is to take place when the document is dated for example, the board minute could state "[Name Agreement ] is not to be delivered on execution, but any director shall be authorised to deliver the Agreement by dating it or causing it to be dated.".

5.

Presumption of authority to deliver

The presumption in favour of a purchaser that a party's solicitor or other legal advisor is authorised to deliver a deed on behalf of the party has been extended by the RRO and is no longer limited to the creation or disposal of an interest in land. This means that solicitors will have presumed authority to complete other types of transaction (although note that the presumption only operates in favour of a purchaser), not just those where land is being sold. Previously, it was necessary to obtain express authority from the client in order to deliver the deed on their behalf.

6.

Execution on behalf of another person (e.g. by attorney)

The Law of Property (Miscellaneous Provisions) Act 1989 used to require a deed to be validly executed by the person making it or the parties to it. It did not expressly contemplate execution by anyone other than the maker or a party to the deed (although in practice people have read in an ability for an attorney to sign on the partys behalf). The RRO has now changed the requirement
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so that to be a deed it must be validly executed by the maker or party or by a person authorised to execute it in the name or on behalf of that person. So it is now clear that an attorney may sign a deed.

7.

Formalities for signing by an attorney

The RRO has confirmed the formalities for execution where an attorney signs are the formalities that apply to execution by the attorney (not those that would apply to the donor). Therefore, where an individual attorney signs (whether on behalf of a company or an individual) he should comply with the requirements for individuals i.e. if he executes a deed he should do so by signing in the presence of a witness who attests. Where a company acts as attorney (whether on behalf of an individual or corporate donor) the company should execute in accordance with the requirements for a company (i.e. in accordance with section 36A Companies Act 1985 - see 1 above). In addition, it has now been made clear that an individual attorney executing a deed may either sign his own name or the name of the donor of the attorney.

8.

Corporations aggregate executing by seal

This paragraph is relevant to documents signed by a corporation aggregate which includes bodies such as charities, local authorities or building societies. There is a statutory pres umption in favour of a purchaser that a document has been duly executed by a corporation aggregate (section 74(1) Law Property Act 1925) if the corporation's seal is affixed to the document 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.

This presumption has been extended to cover all documents under seal (it was previously restricted only to deeds) and to permit two members of the corporation's governing body to attest (previously, it could only be a single member and the secretary/clerk/deputy etc.). Where an officer in a corporation is not an individual, the seal will be r egarded as affixed if it is affixed in the presence of and attested by an individual authorised by an officer to attest on its behalf. There is also a rebuttable presumption of delivery as referred to at 4 above for deeds executed by corporations aggregate so the same practical steps should be taken to ensure that the document is not deemed delivered on execution.

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Olswang 2005 The information contained in this update is intended as a general review of the subjects featured and detailed specialist advice should always be taken before taking or refraining from taking any action.