The COVID-19 pandemic has forced organisations to find innovative ways of working, and Boards have not been spared from this task. Technology has played a role in facilitating and supporting their work. Board portals, like Praxonomy, combined with teleconferencing apps such as Zoom, Webex, or Jitsi are critical tools, since remote meetings are now the norm.
But there is also a need to study and evaluate how board portals might help streamline other board workflows. One such integral process is the dissemination and approval of board resolutions. This particular process poses an interesting challenge: how can these resolutions be shared and reviewed? How can signatures of multiple board members be obtained (especially in these unusual times) in an expedient, safe, and cost-effective manner?
Let’s take a look at the business of board resolutions, and the benefits of employing electronic signatures for Boards to work more effectively.
WHAT IS A BOARD RESOLUTION?
A board resolution is a formal, written decision made by Boards that details a binding corporate action.
Board resolutions contain important information about the business matter, the actual decision made, and the signatures of members who affirmed the resolution.
It can take on varied structures, language, and form.
WHEN IS A BOARD RESOLUTION NECESSARY?
Board resolutions cover critical matters. Examples of critical matters that merit a resolution would include:
- appointment of directors;
- capital expenditure;
- raising capital;
- borrowing funds;
- issuing new shares in the company;
- entering into material contracts;
- remuneration of key employees
APPROVAL OF BOARD RESOLUTIONS
Board resolutions are usually approved during board meetings. However, there are occasions when the Board’s consent can/has to be obtained outside of a formal meeting. This tends to occur when there are time-sensitive matters that require immediate approval. Board members then affix a wet-ink signature on a hard copy of the resolution.
Nowadays, however, electronic signatures and digital signatures have gained traction in lieu of wet-ink signatures for a myriad of reasons.
WHAT ARE ELECTRONIC SIGNATURES?
Electronic signatures, or eSignatures, refer to the process of attaching an encoded signature to an electronic document.
The U.S Electronic Signatures in Global and National Commerce Act, defines an eSignature as an “electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign a record.”
In other words, it needs to be able to prove who signed, what was signed, and the intent and consent to sign.
They are considered to be legally binding as a handwritten signature in many jurisdictions around the world, for as long as they adhere to regulatory requirements. Some of these requirements are the following:
- They must be unique to the signatory;
- They must be created using means within a signatory’s sole control;
- They must be capable of being linked to the relevant document of manner that any subsequent changes would be detectable
WHAT ARE DIGITAL SIGNATURES?
The terms “electronic signature” and “digital signature” are often used interchangeably. But they are two very different concepts.
A digital signature is a cryptographic mechanism used to implement eSignatures. It secures the information linked to the signed document or record through encryption and decryption technology.
To have any form of a digital signature, the signer must have a digital signing certificate from a certifying authority. A digital signature is then “embedded” as a fingerprint in the digitally signed document. This ensures document integrity by making signers uniquely identifiable and verifiable.
In a nutshell, one could say that all digital signatures are electronic, but not all eSignatures are digital. It all depends on the underlying security mechanisms and/or technologies.
WHAT ARE THE BENEFITS OF ELECTRONIC SIGNING?
The benefits of employing electronic signing and digital signatures, as opposed to wet-ink signatures, vary from convenience to security.
Cost-Savings and Convenience
Board resolutions, along with other board documents, no longer need to be printed on paper and/or scanned, mailed out, and physically distributed to procure signatures. Not only does this minimise the impact on the environment, but it also yields time, resource and cost savings for the organisation. The dissemination of board resolutions through the board portal and the affixing of members’ signatures via electronic means can be done with just a few clicks.
Praxonomy has a digital signature feature that is inherently intuitive. It allows administrators (or company secretaries) to collect signatures (via a ‘Signature Request’) on a meeting document from one or more of the portal’s users. Once this ‘Signature Request’ is submitted, all the designated signers will receive a notification for the signature request. When the signer launches the signature request, they are able to review the document and electronically sign with their signing certificates. It’s that simple and secure.
Unlike wet-signatures, the unlawful modification or tampering of digital signatures is a nearly impossible undertaking due to traceability information, and the certificate-based, encryption technologies tied up to it.
Not only do we utilise digital signatures at Praxonomy, but our digital signature feature does not require signed documents to be processed by a third-party solution. This mitigates security risks.
With electronic signing, board resolution approvals can be done in a matter of seconds. As mentioned above, there is no need to print, mail, or scan the documents to be signed. This translates to faster turnaround times, and allows the Board to focus on more pressing matters rather than administrative tasks.
As a final note, the impact of electronic signing on the Board’s workflow and processes cannot be overlooked. The benefits associated with electronic signing directly affect the Board’s ability to work securely, effectively, and with the utmost convenience. It is especially important in light of the new normal of doing things. With electronic signing, the work of Boards is not disrupted or hampered. Measures to employ and adopt this feature ensures that effective corporate governance need not take a backseat in these peculiar times.