Electronic Signatures and the Business Laws Amendment Act, 2020:What you need to know

President Uhuru Kenyatta signed into law the Business Laws (Amendment) Bill 2019. The new law, which has 43 clauses, amends 16 laws and is aimed at enhancing the ease of doing business in the country. In this amendment law, several laws were amended to include the use of electronic signatures in transactions. These laws are the Law of Contract Act (Cap. 23), Registration of Documents Act (Cap. 285), Survey Act (Cap. 299), Income Tax Act (Cap. 470), Stamp Duty Act (Cap. 480), Kenya Information and Communication Act (No. 2 of 1998) and the Land Registration Act (No. 3 of 2012).

In this article, I will highlight the changes in each Act and the impact these amendments will have. But first, take note of the terms below which recur in most of the amendments in the Act.

Advanced electronic signature is an electronic signature which is uniquely linked to the signatory and capable of identifying them. It is created using means that the signatory may maintain under their sole control while being linked to data whose changes can be detectable. 

Electronic signature is data in electronic form affixed to or logically associated with other electronic data which may be used to identify the signatory in relation to the data message and indicate the signatory’s approval of the information contained in the data message. 

Signature includes an advanced electronic signature, an electronic signature, a mark or writing one’s name or initials, making one’s initials on the instrument as an indication that one intends to bind himself or herself to the contents of the instrument.

Highlights of the amendments

Law of Contract Act

In the Law of Contract Act, section 3(6) has been amended to insert the words “physically or electronically” in the definition of the word signature.

Registration of Documents Act

In the Registration of Documents Act, section 2 has been amended to include definitions of electronic documents and various forms of electronic signatures. Some of the words that have been included are “electronic book, advanced electronic signature and electronic signature.”

The other amended section in this Act is section 3 which has been amended to authorize the Registrar of Documents to establish and maintain the Principal and Coast registries in physical and electronic form. The last amended section is section 4 of the Act which provides for the filing of documents in physical and electronic form at the Registry.

Survey Act

The Survey Act was not left out in the amendments. Section 2 of the Act was amended to include the definitions of various forms of electronic signatures. Some of the new terms in the Act are “signature, advanced electronic signature and electronic signature.”

Section 5 of the Act was amended to provide for the sealing and security features of electronic documents that have been processed under the Survey Act. The other amendments are in section 30 of the Act which now allows the lodging of Survey documents physically or electronically and in section 32 which incorporates the electronic affixation of the Seal of the Survey of Kenya.

Stamp Duty Act

The Stamp Duty Act was amended in section 2 to include a stamp’s electronic features in the definition of “stamp”.  

Kenya Information and Communications Act

The Kenya Information and Communications Act,1998 was amended in section 83B to provide for electronic means of authenticating and signing documents.

Land Registration Act, 2012

The Land Registration Act, 2012 was also amended. Section 2 now includes the definitions of various forms of electronic signatures such as “signature, advanced electronic signature, electronic signature and seal.” Section 44 was amended to provide for the use of electronic signatures in the execution of documents processed under the Land Registration Act while section 45 was amended to recognize the execution of documents using electronic signatures. 

Impact of the amendments

The amendments and legal adoption of electronic signatures will help Kenya rise in the Ease of Doing Business rankings. Currently Kenya is ranked number 56 with a score of 73.2. This is because it will hasten processes such as Registration of Property where Kenya ranks 134 with a score of 53.8. This is slightly above the Sub-Saharan Africa regional average which is 53.6.

The other advantages are increased contract speed since electronic signing can prevent any unnecessary delays in finalizing contracts resulting in improved performance. Another advantage of electronic signatures is enhanced security, there will be less worry about security than with paper, which can easily be tampered with. The use of electronic signatures lowers transaction costs by reducing the financial impact of human error such as signing mistakes. Electronic signing software can help mitigate risks by providing alerts about suspicious records or compliance issues involved with a contract and this saves the cost of fixing problems that could have been prevented.

The use of electronic signatures is not devoid of risks. One risk is security varies depending on the vendor. Not all electronic signature vendors offer enough security for business transactions. The most basic type of electronic signature offers no security against tampering, while others offer some basic tamper protection. The other disadvantage is in the use of signature services that rely on proprietary software. Such services lock one to one vendor which leads to problems.

To avert this problem in Kenya, the Ministry of ICT and Youth, The ICT Authority and the Communications Authority of Kenya should develop standards for electronic signature services that may be used in transactions in Kenya. The Act grants the Cabinet Secretary for Lands the responsibility to come up with the appropriate regulations to implement the amendments to Survey Act and Land Registration Act but it should be a collaborative effort across relevant government ministries.

Another challenge that will arise will be with the adoption by the general populace, keeping in mind that digital literacy levels are still low in Kenya. This is exhibited with how people often seek help from cyber cafe operators to transact with the government on the e-citizen platform. This can be dealt with by educating the masses on electronic signatures and digital security.

Conclusion

With electronic commerce picking up in Kenya, the amendments are welcome. They will enable transactions to be more seamless and fast. They will also help Kenya improve in terms of ease of doing business. The implementing entities should emphasise on educating the masses on electronic signatures, its advantages and necessary digital security safeguards. 

 

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