In light of the COVID-19 outbreak, the Movement Control Order (“MCO”) imposed by the Malaysian government has forced businesses to radically rethink their day-to-day operations and to embrace technology deployment across all forms of communications and transactions.
 
Despite the MCO, many businesses endeavour to carry on operations and proceed with transactions as far as possible. Many aspects of business operations require forms, documents and agreements to be signed. However given the need to minimise face-to-face interaction, obtaining a wet-ink signature may prove to be challenging during this time. As such, many organisations are looking towards executing documents electronically.
 
In this article, we set out some key considerations surrounding the use of electronic signatures in the execution of documents, as well as its practical implications.
 
Electronic Signatures
 
In Malaysia, the Electronic Commerce Act 2006 (“ECA”) provides for the legal recognition of electronic messages in commercial transactions, the use of electronic messages to fulfil legal requirements, as well as enabling and facilitating commercial transactions through the use of electronic means.
 
Pursuant to the provisions in the ECA, electronic contracts are granted legal effect and are enforceable in Malaysia.
 
Where an electronic signature is used, the ECA provides that it must:-
 

The ECA further provides that an electronic signature is as “reliable as is appropriate” if:-
         

There has not been much guidance as to the exact measures which much be taken to ensure that an electronic signature complies with the requirements above. For example, whether a ‘copy & paste’ JPEG or PDF signature affixed on an electronic document would be acceptable, or whether more stringent measures must be adopted such as the use of specialised electronic signature software e.g. DocuSign.
 
In the case of Yam Kong Seng & Anor v Yee Weng Kai [2014] 4 MLRA 316, it was held that an SMS had fulfilled the requirements of an electronic signature under the ECA as the sender was adequately identified with the telephone number representing the caller or the sender of the electronic message. However, as this case appears to apply a very liberal interpretation, it remains to be seen whether this would continue to be upheld.
 
Digital Signatures
 
Digital signature is a sub-set of electronic signatures, governed by the Digital Signatures Act 1997 (“DSA”). A digital signature is defined as “a transformation of a message using an asymmetric cryptosystem such that a person having the initial message and the signer’s public key can accurately determine: (a) whether the transformation was created using the private key that corresponds to the signer’s public key; and (b) whether the message had been altered since the transformation was made.”
 
Digital signatures use certificate-based digital IDs to authenticate each signer’s identity, which provides a higher level of security and assurance. Further, each signature is bound to the document with encryption which demonstrates proof of signing and such validation is done through licensed certification authorities. A document signed with a digital signature which meets the requirements for validity under the DSA is as legally binding as a document signed with a handwritten signature, or an affixed thumbprint or any other mark.
 
Where the law requires a seal to be affixed to a document, such requirement may only be fulfilled by using a digital signature.
 
Exceptions
 
It should be noted that the ECA does not apply to specific transactions or documents namely:
 

Therefore, these types of documents cannot be executed in electronic form if they are intended to be legally binding.
 
Commentary
 
Given that the position regarding electronic signatures remains uncertain, before using the same, thought should be given as to the level of risk of such electronically-signed documents being disputed on its validity. Where there is a higher risk of the execution of such documents being disputed, it would be advisable to have such documents signed physically. However, where it is not feasible to have such documents signed physically and the execution is absolutely essential during this period, on a balance of risks, organisations may consider using electronic signatures.
 
In the event the parties do not wish to take this risk, an alternative would be to have the document signed in counterparts, that is, for each party to sign the document separately and deliver the same to the other by courier or post. There are clauses which may be drafted into agreements to cater for signing in counterparts.
 
Further, it is also pertinent to bear in mind that where certain types of documentation may be required to be notarised or attested, having such a document electronically signed may not be sufficient.
 
On a practical level, certain governmental or regulatory authorities may only accept wet-ink signatures to process documents. For example, it is doubtful whether the stamp office will stamp a document without traditional wet-ink signatures, and the land office will most certainly require physically signed documents for registration of land dealings. Therefore, such considerations should be taken into account when deciding whether or not to execute forms or documents using an electronic signature.
 
In essence, electronic signatures are a viable solution especially where face-to-face meetings are not feasible. However, the use of electronic signatures warrants careful consideration in light of the factors discussed above.
 
If you have any queries, please contact Jillian Chia (jc@skrine.com), Natalie Lim (natalie.lim@skrine.com) or Beatrice Yew (beatrice.yew@skrine.com).