Digital vs Electronic Signature: Legality in Malaysia 2022

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digital vs. electronic signature

Signatures online are a common phenomenon in the digital enablement transformation of businesses globally and Malaysia.

A digital signature and an electronic signature are two classifications in the online stamping of signatures over documents.

Choosing the most appropriate ones that have legal validity in Malaysia in 2022 is essential for businesses. 

Let us understand the critical and marginal difference between the e-signature and the digital signature, and their legal validity in Malaysia.

What is Digital Signature

Digital Signature

A digital signature is also a form of e-signature offering more security and is affirmative in comparison to the conventional e signature.

Digital signatures relies on the public key infrastructure having encryption standards, and the signature links a fingerprint of the document to a user identity.

In the cases of transacting secure documents between parties, the usage of the digital signature is a pragmatic approach.

Validation of the digital signatures is performed by the Digital Signatures Act 1997 (Act 562) of Malaysia or the trust service providers and is an affirmative signature related to identity.

Digital signature preference usage for critical documents is increasing over a period and is considered more authentic than e-signature.

As the documents signed with a digital signature link the fingerprint of the document to a user identity, it is permanently embedded into the respective document.

Any tampering with the respective signature in the document is shown as tamper evidence. Digital signatures in Malaysia as a buzzword is gaining prominence, as its legality is evident from the approvals and acceptance among the official communication practices. 

International standards of security practices followed by the trust certificate providers across the world and in Malaysia enables the digital signature Malaysia as one of the authenticated and secured signs over a document. 

What is Electronic Signature

Electronic Signature

With the growth in ecommerce business and digital transformation taking place rapidly, an electronic signature has become a popular solution due to the simplicity it offers.

It enables users to sign documents online with a click of a mouse, using the handwritten signature onto a document.

While the ease of using the electronic signature is undeniable, the validity of the e-signatures in certain conditions becomes a gray area of legality.

E signature do not have any secure coding or encryption integral to the e-signature, unlike digital signatures.

The time and identity stamping takes place in the digital signature using the technology, and such stamp working as a permanent record is not an available option in an e signature.

Technically, an e signature is an image placed on the document, and any tampering with the document can’t be regulated.

The other drawback in the case of e signature is the need for verification with the vendor about any tampering in the document.

In the instances of changing the vendor, the information signatures stored on the vendor’s server shall be lost.

Knowing the differences between an e signature and a digital signature is not sufficient to understand the legality of digital signature Malaysia and validity of e signature Malaysia as per the Electronic Commerce Act (ECA) 2006.

Paperless document agreements are pragmatic for businesses in Malaysia, and it is encouraged for scores of benefits like being environmentally friendly, ease of processing the documentation, and security.

However, a user needs to be careful about the legal implications of using a digital signature or electronic signature Malaysia.

Both the electronic signature and the digital signature have different legal pursual under Malaysian laws.

The following are some insights into how the respective digital signature and e-signature can be a potential and legal validity for distinct kinds of documents.

Electronic Signature Legal Validity 

  • As per the ECA norms, even a text message from a system or a phone can be seen as an e signature of a resource.
  • Sources or occasions wherein the e-signatures aka e signature are considered legally valid are
  • HR documents constituting employment contracts, terms and conditions documents, and onboarding documents.
  • Organizational internal documents used for internal consumption in a business environment
  • Commercial real estate documents like lease agreements, sales, and purchase contracts.
  • Minutes of meetings in a business, and resolution passage (subject to the company’s constitution)

E signature in Malaysia do not have legal validity in the documents like Power of Attorney, Wills, Trust documents, Negotiable instruments related documents, bills of exchange, promissory notes, and other sets of documents like statutory declarations, etc. 

Digital Signature Legal Validity

Digital signature Malaysia meeting the DSA’s validity criteria qualify as legally binding in Malaysia and in the instances of law mandating handwritten signature or thumbprint affixture, a digital signature can be used. 

Like the electronic signature, even in the case of digital signatures, the validity is not legal in the case of Power of Attorney, Wills, Codicils, Trusts, bills of exchange, promissory notes, and other negotiable instruments. 

Digital signatures are not legally valid over any instrument dealing in properties under Malaysian National Land Code, and the Statutory Declarations. 

Licensed certification authorities authorized to issue digital signatures in Malaysia are available in the public domain, and currently, there are no foreign certification authorities recognized in digital signature Malaysia.

Digital signatures used in the documents must be from the Malaysian government-authorized certified list of service providers for digital signatures in Malaysia

For SMBs of Malaysia, focusing on digital enablement, and moving the business operations more into the digital front, adapting to the emerging trends like paperless documents, digital signatures, and e signature is paramount.

However, digital signatures should be handled securely to prevent any misuse of the signatures.  Thus, securely managing access to digital signatures is essential.

Choosing the right vendors for digital signatures and ensuring that all the internal stakeholders of the business adapt to the digital and e signature can lead to the sustainable digital transformation of businesses in Malaysia. 

Exabytes provides “HelloSign” – legally binding electronic signatures as part of its wide range of digital solutions. With features including bank level security, it aids paperless workflow and saves cost.

For more information, and assistance in managing the e signature or digital signature for the teams, reach out to Exabytes. 

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