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Epidemic-safe company set-up, transformation and sale or purchase of property with digital attorney counter-signature

Company proceedings, property sale and purchase contracts: almost everyone automatically remembers that an attorney is necessary for these procedures and the signature typically takes place in the office of the legal representative. Many are unaware, however, that company foundation and company transformation processes and even sales and purchases of property requiring attorney counter-signature can be carried out electronically without personally seeing the attorney.

Now, as we have to minimize personal contact as much as possible, the above-mentioned opportunity is particularly important, that is why we explain how it works.

Digitalization also offers a solution in law - the regulatory background is flexible

The regulation of attorney activities in terms of counter-signatures is convenient for individuals who are staying abroad or are otherwise busy but it is also a very useful opportunity in the current state of epidemic emergency. It allows attorneys to proceed electronically using video calls what counter-signing the signature of a previously identified client. The procedure must comply with the requirement of transferring and recording simultaneously both audio and image.

Previously, the certification of authenticity by the Hungarian mission or an Apostille was necessary in the case of foreign signatures for a standard company foundation or amendment process and for sales and purchases of property (or authorizations for these). Compliance with this formal requirement demanded substantial time and cost from the person concerned but today this can be solved faster and cheaper. In order for a document counter-signed by the attorney but signed separately by the parties to have full conclusive force, authentication or certification of authenticity by the mission or an Apostille is not required.

Accordingly, in practice, the client (who may be thousands of kilometres from the attorney) may sign the document during a video call or may acknowledge the signature on the document presented in a video call as his own based on which, the attorney may counter-sign the document and submit it to the court of registration or land office without having to fulfil further formal requirements.

It is not a problem either if the counter-signing attorney is not available at the moment as his authorized deputy may also carry out the video call. This way the client does not have to appear in front of a foreign authority and struggle through the relating bureaucratic procedure but can sign the document quickly and easily from his own office or, what is more likely these days, from his home.

Regulation is even more flexible in certain cases. In the case of documents that are suitable in electronic form for the administration of a certain matter, for example, in company proceedings (land register related documents are for now included in this group) not even a video call is necessary for the attorney to be able to countersign these or for the attorney to use these as electronic documents himself. However, in company proceedings it is necessary in this case that the signatory has qualified electronic signature authorization. This is, by definition, an enhanced security electronic signature generated by a qualified electronic signature tool which is based on the qualified certification of the electronic signature. Simply put this means that for such signature authorization, an organization with proper authentication (like Microsec or Netlock) issues an intelligent card after personal identification with which documents can be signed electronically. In our experience, most executives do not yet have such signature tools, which however does not prevent administration without personal presence but it makes the physical generation (printing and mailing) of documents necessary.

Identification for anti-money laundering purposes

According to the anti-money laundering regulations in force, the attorney must identify the client and may only execute orders for properly identified clients. The question arises whether the above procedure can be applied in the case of persons previously not identified by the attorney.

Based on effective anti-money laundering and attorney regulations, client identification may only be performed using electronic means of communication pre-audited by the Chamber of Attorneys, the supervisory body for attorneys. Such audited software includes, for example, certain versions of the Skype and MTeams video call programs that are relatively easily accessible for the broad public. This means that the acting attorney can first "remote identify" the person concerned in a video call, which may be followed directly by the signing of the document by the client or the acknowledgement of a signature as his own or by signing through an electronic document authentication service.

Digital solutions - electronic vs. traditional countersigning of documents

Regarding the digital solutions available, we must differentiate based on whether the goal is to countersign a signature of an already identified client or remote identification of the client is also necessary. In the first case, any technical solution may be applied that is suitable for transmitting image and sound at the same time provided that recording of the video call is possible.

In the latter case, however, when remote identification is necessary, only audited electronic communication tools may be used. The process of identification (the voice and image files of the video call) must be recorded and kept by the attorney, which means that this convenient solution may only be applied subject to the client's express consent to the recording.

After signing, counter-signature by the attorney may take place in three ways depending on the procedure in which the document in question is to be used:

  1. In the first case, the documents have to be submitted on paper and therefore, "physical" counter-signature is necessary. This applies, for example, to documents relating to land register requests. This means that the document printed by the attorney and signed in a video call must be sent by mail or courier to the attorney or the signature on the document sent to the attorney must be acknowledged later in a video call. The attorney then counter-signs the documents and affixes his dry seal to it and initiates the necessary procedure.
  2. In the second case, if an electronic document is acceptable in the procedure (like in the case of a company foundation),as described above, if the client has qualified electronic signature authentication, he may sign the document in the form of an electronic document, which can then be sent to the attorney. In this case, the document is not created in physical form and it will also be counter-signed electronically by the legal representative (using electronic signature and time stamp) and submitted in the given procedure.
  3. In addition to the above, attorney counter-signing is also an option for documents in the NISZ AVDH government document authentication system (https://niszavdh.gov.hu/index) subject to the identification of the individual through the "ügyfélkapu" administrative portal. This is an electronic document authentication service requested by the client for which the client does not need to have electronic signature authorization, only "ügyfélkapu" access. We discussed this matter with multiple courts of registration and we can draw the conclusion that no standard practice has been established yet for this process among courts of registration it is therefore possible that documents countersigned this way may be accepted in the practice of certain courts of registration.

Digital signature can be applied for other contracts also

Interpretations vary as to whether electronic documents signed by a company executive using a document authentication service (e.g. NISZ AVDH) but without attorney counter-signature are acceptable as written contracts and as proper company signatures.

The Act on the Professional Activities of Attorneys specifically provides that, in the case of legal persons or organizations without legal person status, the attorney may counter-sign electronically the electronic document prepared by the natural person authorized to represent the entity with signature authentication. As documents with electronic attorney counter-signature are private deeds of full conclusive force, we take the view that contracts that do not require counter-signature may validly be concluded electronically even if the executive in question does not have a signature authentication tool.

Find out more on our digital company law and contracting solutions here.

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