Digital vs Electronic Signatures in Malaysia: a Guide

The ECA legally recognises electronic signatures used in commercial transactions either:

• to fulfill legal requirements; or
• to facilitate commercial transactions through electronic means.

In Malaysia, electronic signatures are typically used for simple contracts and agreements (such as the ones outlined below) where the risk of legal disputes around document validity is low.

Electronic signatures are legally binding under Malaysian law, where they fulfil the ECA requirements, being:

1. that the signature is attached to, or logically associated with, an electronic message;
2. the signer and their approval of the related information can be adequately identified; and
3. the signature is as reliable as is appropriate, given the purpose and circumstances for which the signature is required.

To be considered ‘reliable’, electronic signatures must also fulfill these ECA requirements:

1. the means of creating the electronic signature is linked to, and under the control of, that person only;
2. any alteration made to the electronic signature after signing is detectable; and
3. any alteration made to that document after signing is detectable.

Some grey areas surround these requirements as they have largely been untested in Malaysia Courts. However, we recommend that companies adopt internal guidelines relating to the use of electronic signatures that outline the approvals process, digital security measures, electronic record keeping policies and compliance and internal audit team procedures. These guidelines can be used to provide evidence that the ECA requirements have been met. Companies may consult their lawyers or corporate secretarial agents for assistance in this regard.

Common electronic signature applications

There’s a reasonably broad scope when it comes to applying electronic signatures in Malaysia to execute documents. For example, case law suggests that even a text message can be considered a legally binding electronic signature under the ECA.

More typically, electronic signatures are commonly used in:

• HR documents: Employment contracts, benefits paperwork and new employee onboarding processes;
• Commercial agreementsbetween corporate entities: Non-disclosure agreements, procurement documents and sales agreements;
• Commercial real estatedocuments: Lease agreements, and sales and purchase contracts; and
• Minutes and resolutions:(subject to the company’s constitution).

When deciding whether to use an electronic signature in Malaysia, it is important to note that while electronically signed documents are legally enforceable, wet-ink signatures may still be required for stamping and some filing and registration procedures. Some financial institutions may also require wet-ink signatures.

In Malaysia, electronic signatures are not allowed in:

• Power of Attorney documents as per section 2 (2) of the ECA;
• Wills, codicils and trusts as per section 2 (2) of ECA;
• Negotiable instruments, bills of exchange, and promissory notes as per section 2 (2) of the ECA;
• Any instrument dealing with properties under the Malaysian National Land Code; and
• Statutory Declarations under the Statutory Declarations Act 1960.

The documents listed above cannot be executed via e-signature or digital signature because they require notarisation or attestation before a public notary or commissioner of oaths. As such, wet-ink signatures are required for these documents.

A digital signature that meets the DSA’s validity requirements is as legally binding in Malaysia as a handwritten signature, an affixed thumbprint or any other mark.

When the law requires a seal to be affixed to a document, a digital signature must be used.

In Malaysia, like electronic signatures, digital signatures are also are not allowed in:

• Power of Attorney documents as per section 2 (2) of the ECA;
• Wills, codicils and trusts as per section 2 (2) of ECA;
• Negotiable instruments, bills of exchange, and promissory notes as per section 2 (2) of the ECA;
• Any instrument dealing with properties under the Malaysian National Land Code; and
• Statutory Declarations under the Statutory Declarations Act 1960.

Currently, there are no foreign certification authorities recognised in Malaysia. Digital signatures can only be validated with one of the following licensed certification authorities:

• Post Digicert Sdn Bhd;
• MSC Trustgate Sdn Bhd;
• Telekom Applied Business Sdn Bhd;
• Rafcomm Technologies Sdn Bhd;