Monday, December 11, 2017

Counterparts Clauses and Virtual Signing

The possibility of all parties to a contract being available in the same place at the same time for signing and execution of an agreement is increasingly limited, especially where transactions involve multiple parties. Accordingly, the practice of “virtual signing” has developed in recent years. In light of this, a joint working party of the Law Society Company Law Committee and the Company Law and Financial Law Committees of the City of London Law Society has published a guidance note (the “Guidance”) to overcome some of the practical hurdles of virtual signing.

Virtual signings 

Practically, it may be both: (a) problematic for everyone who is required to sign an agreement to be physically present for signing; and (b) difficult to post an agreement due to time constraints. Accordingly, the practice of “virtual signings” has developed whereby an agreement can be executed without the parties meeting and in which signature pages to a relevant agreement are executed in advance of the final agreement and subsequently transferred to the final form. As English case law has shown, in the case of R (on the Application of Mercury Tax Group Limited and another) v HMRC [2008] EWHC 2721 (“Mercury”), a signature on an incomplete draft deed or contract, as the case may be, cannot be transferred to execute the final form. Following the decision in Mercury, the Guidance provides various options for effectively executing English law-governed agreements at virtual signings. Such options are non-exhaustive, however, and each transaction should be considered according to its own facts. By way of example, some of the options included in the Guidance provide as follows:

1. Where a document is signed in counterparts by each party, the following steps may be taken:

  • parties should make arrangements for signing ahead of finalising the document; 
  • when the documents are finalised, the final execution copies of the documents are emailed (as pdf or Word attachments) to all absent parties; 
  • each absent signatory prints and signs the signature page only; 
  • each absent party then returns a single email attaching (a) the finalised document; and (b) the signed signature page or, in the absence of attaching the final document, the absent party should give authority to attach the signed signature page to the final approved version of the document; and 
  • a final version of the document, together with copies of the executed signature pages, may be circulated to the parties to evidence the execution of the final document. The printed execution version of the document with the attached signed signature pages will constitute an original signed document. 

2. Where the signature pages of a document are pre-signed before the document is finalised, the following steps may be taken:

  • parties should make arrangements for signing ahead of finalising the document; 
  • before signing, the signature pages relating to the document still being negotiated should be circulated to each absent party; 
  • the absent signatories sign the signature page which should be returned and subsequently held until authority is given for it to be attached to the document; 
  • the finalised document should be emailed to each absent party and confirmation should be sought from the party (or its advisors) that the final version is agreed; the pre-signed signature page may be attached to the final document once authorisation has been given by the absent party (or its advisors) and the document may be released and dated. 

The printed final agreed document with the attached pre-signed signature pages will constitute the original signed document.

Counterparts clause 

As referred in option 1 above, it is possible to sign a contract in counterparts. An English law-governed agreement may not be invalidated by the fact that it does not contain a counterparts clause, although a contract that does contain one clarifies that separate copies of an agreement may be executed by different parties and each copy will be considered to be an original. It is considered prudent to include a counterparts clause if there is a possibility that the agreement will be executed by counterparts. Including such a clause will limit a party claiming that an agreement is not binding because there is no one copy of the agreement that is signed by all parties.

Omani legislation 

Omani legislation provides for the legal formalities of the signing and execution of contracts in Oman. In particular, Sultani Decree 48/76 on the Signing Foreign and Domestic Financial Deals in the Sultanate of Oman (as amended), for example, sets out which individuals may sign and execute an agreement concluded in the name of His Majesty the Sultan or on his behalf or in the name of the Government of the Sultanate. However, in the absence of any note from the relevant Omani authorities detailing options for the signing and execution of Omani law-governed contracts in counterparts, it may be worth consulting with the Guidelines.

Conclusion 

Executing an agreement in counterparts involves the various parties to the agreement signing separate (but matching) copies of the same document. Together, the various signed copies will form a single binding agreement, without the need for all the parties to sign the same copy of the agreement. Although not essential, it is usual practice to include a boilerplate clause specifically providing for an agreement to be executed in this way. Further, in order to avoid a similar situation as in the case of Mercury, where agreements are executed by “virtual” signing, it is useful to reflect upon the Guidelines.

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Monday, December 4, 2017

Does State Audit Law or the Law for Safeguarding State Property Apply to You?

The State Audit Law promulgated by Sultani Decree 111/2011 (the “State Audit Law”) is applicable to:

• all companies wholly owned by the Government of the Sultanate of Oman (the “Government”); and

• companies in which the Government holds more than 40% of the share capital.

Each such entity is deemed to be a “Supervised Company.” It should be noted that, pursuant to the law on safeguarding of public property and preventing of conflict of interest promulgated by Sultani Decree 112/2001 (the “Law for Safeguarding State Property”), all employees of companies in which the Government holds more than 40% of the share capital would be considered government officials.

What does being a Supervised Company mean? 

Any entity which falls within the meaning of a Supervised Company should carefully consider the provisions of the State Audit Law. A Supervised Company, for example, has certain obligations including, pursuant to Article 5 of the State Audit Law, to provide State Audit with all draft regulations and systems prepared by it in relation to the Supervised Company’s financial and accounting affairs, taxes and charges.

State Audit also has the right, by virtue of Article 9 of the State Audit Law, to conduct financial and administrative control in all areas including control over investments and all accounts of a Supervised Company. In exercise of this right, under Article 10 of the State Audit Law, State Audit may review without prior notice:

(i) the investments of the Supervised Company;

(ii) any financial irregularities of its employees; and

(iii) any documents or records of the Supervised Company.

A Supervised Company is further under an obligation under Article 21 of the State Audit Law to provide State Audit with the following:

(1) its balance sheets and financial statements;

(2) final accounts and any adjustments or amendments thereto; and

(3) board and auditor reports and management letters approving them.

It should be noted that a Supervised Company has certain reporting obligations including to inform State Audit within one week of any discovery of any financial or administrative irregularity or occurrence of an incident that results in financial loss to the State or any matter than may lead to such loss without prejudice to the other legal procedures that shall be taken.

A Supervised Company should further be aware of the penalties for non-compliance with the State Audit Law. By Article 32 of the State Audit Law, anyone restricting the State Audit from reviewing any of the accounts, papers, documents or other things that State Audit has a right to review or anyone concealing the information, data or documents or submitting incorrect ones shall be penalised by imprisonment for between six to 12 months and/or a fine of between OMR 1,000 and OMR 2,000.

What does being a government official mean? 

A government official has certain responsibilities to prevent misuse of public property (i.e., any property or moveable assets owned by a Supervised Company), as provided by Article 5 of the Law for Safeguarding State Property, and is under a duty to inform State Audit immediately of any violations related to such public property.

Specifically, government officials should be aware that they are prohibited from the following:

(i) using their positions of work to realise a benefit for themselves or others or using their influence to facilitate others obtaining any interest or preferential treatment – this is particularly important when considering the awarding of tenders or contracts;

(ii) using public properties for personal reasons or in ways not intended for such property;

(iii) combining their positions or work and any other work in the private sector which relates to their positions or work; and

(iv) having any share in any company, establishment or profit-generating business directly or indirectly related to their positions or work (this prohibition extends to such government official’s minor children).

Further, government officials should be aware that, pursuant to Articles 12 and 13 of the Law for Safeguarding State Property, if requested by State Audit, they shall be required to disclose to State Audit all moveable monies and properties owned by them and their spouses and minor children and the monetary source of such ownership; and if they become aware of any secrets by virtue of their positions, they undertake not to disclose such secrets, even after the end of the employment relationship with the Supervised Company.

Any failure by a government official to comply with the abovementioned provisions or any other article as may apply under the Law for Safeguarding State Property could result in a government official being imprisoned for up to three years as well as being sacked from his/her position and confiscation of any amounts received in violation of the Law for Safeguarding State Property.

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