UK: Recent Changes To Execution Of Deeds And Documents

Certain changes to the execution of deeds and documents came into effect on 15 September 2005. The objective was to standardise the formal requirements for execution by companies, corporations and individuals in England and Wales. Whilst the changes are technical in nature, they have brought clarity in this area which should assist in the completion of transactions.

A number of inconsistencies and uncertainties in English law in connection with the execution and delivery of deeds and documents were recently identified and summarised in a Law Commission Consultation Paper.

As a result, the Regulatory Reform (Execution of Deeds and Documents) Order 2005 (the "Order") was made. The Order came into force on 15 September 2005. It addresses a number of these issues to standardise the formal requirements for the execution of deeds and documents by companies, corporations and individuals.

Under English law (which is applicable in England and Wales) a simple contract can be oral or written and, if written, it is effective on execution. There are some circumstances where a written document is necessary (for example guarantees and security relating to property). It can be advantageous for certain documents to take effect as deeds since no "consideration" is required for them to be binding. After its execution, a deed must be "delivered" before it takes effect. Delivery is a common law requirement which fixes the date from which the parties are bound. Once delivered, a deed is irrevocable (in the absence of an express right of revocation).

An English company can execute a deed or a document by the affixation of its common seal in the presence of two directors or one director and its secretary, or by the signature of two directors or one director and its secretary. The Order provides that merely executing a document under seal does not make it a deed. A document will be validly executed by an English company as a deed if it is duly executed by the company and delivered as a deed, and it is apparent on the face of the document that it is a deed (usually by appropriate wording).

A document is presumed to be delivered as a deed upon being executed (unless a contrary intention is proved). This applies to corporations as well as to companies under the Companies Act 1985.

Where a deed or document is to be signed by a person as a director or the secretary of more than one company, that person will have to sign separately for each company. Whilst this may not seem to be a major change, it may increase the administrative burden on the directors and company secretary of each of a large number of companies in a group, where they are all to be party to documents relating to a particular transaction.

There are also some clarifications on the way in which an attorney signs on behalf of a donor of a power of attorney. Where an individual signs a deed, he or she must sign in the presence of a witness. If an individual attorney signs a deed on behalf of a corporation, he or she should sign the name of that corporation, as well as signing his or her own name.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.