ABA Business Law Section
Mergers & Acquisitions Committee, Technology in M&A Subcommittee
MAC Digital Documentation Protocol
Project Chairs: Anshu Pasricha (formerly of Koley Jessen, P.C., L.L.O.) and Thomas B. Romer (Greenberg Traurig LLP)
Key Contributors: W. Ian Palm and Stefan Nasswetter (Gowlings), Kathy Woeber Gardner and Karen Masterson Dienst (Montgomery Pacific), Tali Sealman (White & Case) and Brittany Sakowitz (Kirkland & Ellis LLP)
Subcommittee Chair and Contributor: Daniel Rosenberg (Charles Russell Speechlys LLP)
Peer Review: Glenn West (Weil, Gotshal & Manges)
Committee Chair: Wilson Chu (McDermott Will & Emery LLP)
Introduction
As in-person closings, much less in-person signings, go the way of livery of siesen,[1] the Technology Subcommittee of the ABA Mergers and Acquisitions Committee (“MAC”) has prepared a protocol which represents the best practices used by M&A lawyers in arranging for the proper execution and delivery of documents digitally.[2] The “MAC Digital Documentation Protocol” is not an exclusive means to digitally execute and deliver documents, but rather a set of governing principles counsel can rely on to ensure documents are effectively reviewed, executed and delivered digitally.
The digitization of the M&A agreement process has significantly increased the speed with which documents can be changed and greatly enhanced the ability of parties to fine tune agreements up to the last minute—or even second—before signing. Although there have been few cases to date in which the enforceability of an agreement has been challenged due to the failure of the execution and delivery process that was not held in person,[3] we believe adherence to the guiding principles of the MAC Digital Documentation Protocol will help parties to avoid potential disputes on issues such as “what was the final version of an applicable agreement” or “that a party never agreed to the terms of the purported final agreement.”
MAC Digital Documentation Protocol Guiding Principles
The MAC Digital Documentation Protocol is comprised of four guiding principles:
- complete documents should to be made available to signatories for review before or at least as they are signed;
- review of complete documents by the signatories should be confirmed;
- execution of documents by electronic means in accordance with applicable law is supported; and
- delivery of reviewed, confirmed and executed documents should be clearly established.
By executing and delivering a document in concert with these guiding principles, we believe sufficient evidence of due execution and delivery of that document has occurred amongst the signatories.
How to use the MAC Digital Documentation Protocol
In our view, simply including a reference to the MAC Digital Documentation Protocol in a transaction document is sufficient to document the parties’ intent to execute and deliver documents in accordance with its guiding principles.
Failure to adhere to the MAC Digital Documentation Protocol, whether or not it has been referenced, should not in-and-of-itself mean a document is not effectively executed and delivered. However, adherence to the MAC Digital Documentation Protocol, whether or not referenced, is intended to be a sufficient means through which documents can be executed and delivered by electronic means and thereby enforceable amongst the parties to such documents.
Including the MAC Digital Documentation Protocol (whether by reference or by including language that reflects its guiding principles) is intended to create a presumption that the parties have complied with the MAC Digital Documentation Protocol absent clear evidence to the contrary.
Sample Language
Sample language to be included in documents consistent with the MAC Digital Documentation Protocol is provided below. Including this language in an agreement is not required to evidence the parties’ intent to execute and delivery documents in accord with the MAC Digital Documentation Protocol. However, incorporating the MAC Digital Documentation Protocol by reference is considered to be sufficient evidence of the parties’ intent.
The MAC Digital Documentation Protocol guidelines are designed to apply to the execution and delivery of any agreement or document that is signed by one or more parties. With the exception of the sample signature page language which is designed to be applicable to any document, the sample language is designed to be incorporated into a purchase or merger agreement and applicable to the documents required to close a transaction.
Incorporation of the MAC Digital Documentation Protocol by Reference
Specific reference to the MAC Digital Documentation Protocol is the clearest way to document the parties’ intent to sign an agreement or close a transaction in accordance with the MAC Digital Documentation Protocol.
Sample Signature Page Language:
The undersigned hereby execute and deliver this Agreement in accordance with the MAC Digital Documentation Protocol as of the day above first written.
Sample Closing Language:
The Closing. On the terms and subject to the conditions of this Agreement, the closing of the transactions contemplated by this Agreement (the “Closing”) shall take place on the Closing Date by the electronic exchange of documents in accordance with the MAC Digital Documentation Protocol (the “Protocol”). No Party shall be required to appear at any specific physical location to effect the Closing. The Closing shall be deemed effective at 12:01 a.m. Eastern Time on the Closing Date (the “Effective Time”).
Principle 1: Making Available Complete Documents to be Executed and Delivered Via Electronic Means.
By incorporating the MAC Digital Documentation Protocol into their agreement, parties are agreeing to make available to each party (or their counsel)[4] who will be executing and delivering a document electronically the entire contents of that document (together with all addendums, exhibits, annexes, supplements and other materials incorporated by reference)[5] by:
- circulating electronic versions of such document (and all referenced materials) via email;
- providing access to electronic versions of such document (and all referenced materials) via a shared work folder on a mutually agreed secure website; or
- providing access to such document by any other means in which the document and (and referenced materials) can be accessed and viewed by the signing party.
Sample Language:
Preparation of Final Documents. Unless otherwise agreed by the Parties in writing, prior to Closing, Buyer’s counsel, on behalf of the Buyer, will circulate [by email/by providing appropriate access to a work folder on a mutually agreed upon secure website] final, execution versions of the Purchase Agreement and all other Transaction Documents, together with all addendums, exhibits, annexures and supplements thereto (collectively, “Closing Documents”).
Principle 2: Ensuring Review of Complete Documents to be Executed and Delivered via Electronic Means.
Each party to a document made available pursuant to the MAC Digital Documentation Protocol or their counsel,[6] will review each document to be executed by that party to ensure that such document manifests the agreement to which such party intends to be bound once executed and delivered.
Sample Language:
Review and Confirmation. Each party will review and confirm that such Closing Documents are acceptable as final documents that can be executed and delivered by the Parties.
Principle 3: Valid Execution of Documents Via Electronic Means.
Execution of a document circulated and reviewed in accordance with the MAC Digital Documentation Protocol or similar means, using a technology that complies with applicable law governing the execution of documents by electronic means[7] is an acceptable way to execute documents in accordance with the MAC Digital Documentation Protocol.[8],[9],[10] Though not a required part of the MAC Digital Documentation Protocol, the collection—and holding in escrow—of signature pages to documents by one or more counsel and/or parties to a transaction prior to delivery or release of such signature pages (including prior to finalization of the terms of such documents) is a common practice. Such practices, if the other aspects of the MAC Digital Documentation Protocol are otherwise complied with, do not violate the terms of the MAC Digital Documentation Protocol. Delivery or release of such signatures in accordance with the MAC Digital Documentation Protocol is addressed in Principle 4.
Sample Language:
Execution and Collection of Signatures. On receipt of such confirmation from Seller’s counsel, Buyer’s counsel shall circulate by [email/mutually agreed upon E-Signing Application Service Provider that is compliant with the U.S. federal E-SIGN Act of 2000], all such Closing Documents to all Parties and any other signatories to the applicable Transaction Documents. Prior to the Closing, all Parties and any other signatories to the applicable Transaction Documents shall have executed and circulated the signature pages to the Closing Documents to Buyer’s counsel, to be held in escrow pending release of such signature pages to the Closing Documents in accordance with the terms agreed amongst the Parties and any other signatories to the applicable Transaction Documents.
In addition, a proposed counterparts and e-signatures language could be:
Counterparts and Electronic Signatures. This Agreement may be executed (i) in a single document signed by all parties or (ii) in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be (i) signed in person and delivered in person, via facsimile, or via other means of electronic delivery (including emailing an electronic copy thereof) and/or (ii) signed and delivered by means of employing electronic signature technology that complies with the Electronic Signatures in Global and National Commerce Act of 2000 (E-SIGN), or other Applicable Law governing the execution and delivery of this Agreement through electronic means. Any counterpart executed and delivered in accordance with the terms of this paragraph will be deemed to have been duly and validly executed and delivered by such party.
Principle 4: Effective Delivery of Executed Documents (Release of Signatures).
In order for a document to be enforceable against a party that document must be duly executed and delivered by that party.[11] A document executed in accordance with the MAC Digital Documentation Protocol will be effectively delivered in accordance with the MAC Digital Documentation Protocol if a party, their counsel or an authorized person affirmatively expresses the intent of the applicable party to deliver (often referred to as release their signature to) the duly executed document to the other party(ies). Any means by which a party or their counsel communicates their intent to deliver a duly executed document that clearly demonstrates both the applicable document they intend to deliver and the required intent to deliver it (whether by electronic means, or via verbal communication in person, by phone, or any other means in which the party or their representative can be heard and can hear the other participants) is acceptable under the MAC Digital Documentation Protocol. Though not required, the MAC Digital Documentation Protocol encourages practitioners to use a secure website, at which the applicable document can be viewed by both the party intending to deliver their executed copy thereof and receiving party, together with a communication (phone or video conference, in person meeting, or email) stating that a signature can be affixed to the posted document and such document may be delivered to the other party. Many websites can track and make available all activity with respect to documents posted to the website which will provide parties and their counsel assurance that a document which has been previously confirmed has not been changed. Emailing or circulating documents in a way that otherwise meets the principles of the MAC Digital Documentation Protocol is also accepted.
Sample Language:
Delivery of Executed Documents (Release of Signatures). On the Closing Date, at a mutually agreed on time, Parties and any other signatories (together with authorized representatives of such parties) shall coordinate a closing teleconference call (“Closing Call”). At such Closing Call, Buyer’s counsel (on behalf of Buyer) and Seller’s counsel (on behalf of Seller) shall confirm that the Parties are satisfied that (i) in the case of signing, all Parties are in agreement that all signature pages shall be released by Buyer’s counsel concurrently, and (ii) in the case of closing, all conditions to Closing have been satisfied or waived in accordance with the terms of the Purchase Agreement, and all Parties are in agreement that all signature pages shall be released by Buyer’s counsel concurrently, subject only to Buyer providing wire transfer confirmations/fed. reference numbers to the Parties promptly (and in any event, no later than [two hours] following the Closing Call).
Archive and Distribution. Buyer’s counsel shall provide a copy of the archived Closing Documents circulated by Buyer’s counsel in accordance with [Section [●]—Preparation of Final Documents]. Buyer’s counsel shall provide a copy of all fully-executed and delivered Closing Documents to Seller and Seller’s counsel.
[1] An English common law ceremony dating back to the Middle Ages in which the selling party intending to convey an interest in real property literally handed to purchasing party a clump of soil, a twig, a key to a building, or other token. The Law of Property Act, passed in 1925 (15 & 16 Geo. 5, ch. 20 [Eng.]), abolished the practice.
[2] Our use of the term “digital” is intended to cover a number of situations ranging from fully digital execution and delivery of documents to hybrid situations where documents are emailed, signed manually, and delivery of those signatures is sent electronically.
[3] See, Kotler v. Shipman Assoc., LLC, (Del. Ch. Aug. 27, 2019) (finding a contract unenforceable despite the agreement being fully executed, because the signature page was attached to a version of the contract that was not the version that the CEO signatory intended to execute); UBEO Holdings, LLC et al. v Drakulic (Del. Ch. April 30, 2021) (finding a forum selection clause unenforceable in part because Drakulic was never provided a copy of the merger agreement and was not informed of the agreement’s forum selection provision or other provisions restricting his livelihood, and Drakulic was intentionally kept in the dark of the contents of the agreement).
[4] Circulating or providing access to documents to counsel only, with the understanding that counsel will circulate or provide access to such documents to their clients is a common and accepted practice. Opposing counsel can assume, absent specific knowledge to the contrary, that a party’s counsel will ensure their client has been provided access to documents to be executed electronically.
[5] Often transaction documents (with attachments) are too bulky and cumbersome to circulate by email. In particular, all attachments to disclosure schedules are unlikely to be circulated via email (unless multiple emails are circulated). As such, consider providing the alternative of uploading to a website.
[6] Review and confirmation by counsel on behalf of their client that a document contains the terms and conditions negotiated by the parties is an accepted practice. Opposing counsel can assume, absent specific knowledge to the contrary, that a party’s counsel will ensure their client has been provided access to documents to be executed electronically.
[7] e.g., The Uniform Electronic Transactions Act (UETA), which is the law in all but a few United States jurisdictions, or the Electronic Signature in Global and National Commerce Act, 15 USCA §§ 7001 et seq. (E-SIGN), which is federal law and preempts state law in certain instances.
[8] Practitioners should confirm that each document to be executed via electronic means may be so executed in accordance with applicable law. Certain documents (such as deeds and negotiable instruments) may not be executed electronically under applicable law.
[9] See TriBar Opinion Comm., Comment Concerning Use of Electronic Signatures and Third Party Opinion Letters, 75 Bus. Law. 2253 (2020). Our European colleagues can comment on the relevance of Regulation (EU) No 910/2014 (the eIDAS Regulation) that applies to EU Member States from 1 July, 2016. Similarly, in Canada, we understand that all provinces and territories have adopted e-commerce legislation providing that an electronic signature is valid and enforceable so long as the electronic signature is reliable for the purpose of identifying the person and the association of the electronic signature with the relevant electronic document is reliable.
[10] Note: In the United Kingdom, the Law Commission (which is the statutory independent body which reviews the law of England and Wales and recommends reform where needed) has recently summarised the English legal position in its September 2019 report (Law Commission report: Electronic execution of documents (Law Com No 386, September 2019)) as being that electronic signatures are capable in law of being used to execute documents (including deeds). This conclusion is based on the provisions of the EU eIDAS Regulation (Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC), the UK’s Electronic Communications Act 2000 and case law relating to electronic signatures and signatures more generally. However, it also recommended that an industry working group be established to consider practical issues relating to the electronic execution of documents and the law relating to deeds more generally. The UK Government subsequently endorsed these views in March 2020, noting that the timing of a wider review of the English law of deeds would be subject to overall government and Law Commission priorities given the current volume of UK law reform work.
[11] Due authorization is also required but is not within the scope of the MAC Digital Documentation Protocol.
