Electronic signing provides a safe and secure system where documents can be signed remotely
The global outbreak of Covid-19 has impacted everyone, from businesses and healthcare providers to traders and professionals. Every company has been forced to change the way it does its business. Due to the pandemic, businesses are facing multiple logistical and operational challenges. The impact has been felt on all aspects of running a company including planning and execution. One of the biggest impacts has been on the process of getting business contracts executed - in simple terms - the signing of contracts and other approvals.
Electronic signing has been around for many years, but Covid-19 has proved to be the catalyst in increasing the adoption by India Inc. It is helping the industry to move towards a paperless economy by offering a faster way of executing documents. Electronic signing provides a safe and secure system wherein approvals, contracts, and other documents can be easily and effectively signed by persons remotely.
The Rapid Adoption of Electronic Signature
The crisis brought upon by the pandemic has accelerated the adoption of digital signatures in all aspects of a business. Companies have no choice but to shift to digital signatures. Previously getting something signed just required walking up to the person and getting his or her signature. Today, you simply cannot print, sign, scan, and email a document when you are working from home or have no access to the company printers and scanners. The task that seemed so easy before the pandemic suddenly has become one of the most difficult ones.
This challenge was recognized by many regulatory bodies and during 2020, we saw various announcements allowing the use of digital signatures. The Institute of Chartered Accountants of India (ICAI) allowed the use of e-signatures for signing audit reports and certificates in April. The Ministry of Corporate Affairs (MCA) allows the use of video conferencing for conducting various meetings like EGMs. The Securities and Exchange Board of India (SEBI) allowed using electronic signatures for authentication or certification of any filing or submission made to stock exchanges under LODR. In August, the Insurance Regulatory and Development Authority of India (IRDAI) dispensed the use of physical signatures on proposal forms.
Are Digital Signatures the same as Wet Ink Signatures?
For organizations that were used to wet ink signatures, this question tended to create doubts around the validity of the electronic signatures. The law in India also presented some challenges in understanding when it came to the usage of electronic signatures.
To make the point clear, the law is unambiguous when it says that no document can be considered invalid just because it was signed electronically. However, the law also prescribes certain criteria for which electronic signatures will be considered valid. Only digital signatures which are issued by a certificate authority in the form of a USB dongle and the Aadhaar digital sign are considered to be the same as wet ink signatures, having the same legal validity and presumed to be signed by the person without requiring any additional evidence.
It is important to note that digital signatures are a special type of electronic signature which are backed by KYC of the signer and validated by a certificate issued by a government authorized body. Further, not all documents can be signed by even such digital signatures. Documents like the power of attorney or documents about a will or the sale of immovable property are still required to be signed by wet ink signatures.
Challenges in Adoption of Digital Signatures in India
The USB dongle-based signatures are commonly used only by certain high-ranking officials of companies specifically to sign tax documents or MCA documents or signing a response to a tender. The USB dongle tends to get misplaced and it is difficult to carry it always with you for signing. Moreover, it cannot be used to sign on a mobile device. Therefore, it presents a hurdle in the widespread adoption of digital signatures.
The Aadhaar e-sign is also another approved way to sign, and it can be said that since over 95 per cent of India has been enrolled in the Aadhaar scheme, it would present a convenient way to sign. However, the on-ground reality is that many people do not have the correct phone number linked to their Aadhaar to be able to authenticate themselves with the OTP. It is also difficult to always remember one's Aadhaar number. Not only this, signing with Aadhaar requires that the electronic signing solutions have integrated with the Govt agencies offering the service of the digital sign. Some companies offer a video KYC-based onboarding process based on Aadhaar but that is too cumbersome to achieve the kind of digital speed the country needs now.
To add to the woes of corporate India, many agreements require the payment of stamp duty. During the lockdown, the access to stamp papers was suddenly cut off, and at times, it was impossible to get stamp paper even at black market rates. It presented a hurdle to business. However, now there are a few electronic signing solutions that offer the ability to purchase a stamp paper online, alleviating the situation to some extent.
What is the right time to adopt e-signatures?
Do you want to increase efficiencies, save costs, and increase productivity? If you say yes, then you must also say yes to e-signatures. Some companies are still hesitant, especially in the BFSI segment, as they are worried about regulations and legality but companies in other industries can certainly start mapping their use cases and selecting online signing solutions to make their business processes work smoothly. This is also a good opportunity for Pharma companies to ensure their GxP document compliances are handled online through such electronic signing solutions.
Electronic signature technology has matured a lot. There is strong encryption, secure transmission of data, ability to identify the signer, link the signer to the document, capture an irrefutable audit trail, blockchain, and ability to protect the document against tampering. So, while some challenges remain to be addressed, it can without any doubt be said that electronic signatures are today far more secure, fraud-proof, and convenient than wet ink signatures.
The author is Founder and Managing Director, Cygnet Infotech
DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.