When a company is still small, signing contracts is usually straightforward. The founders are involved in most important decisions, so the person signing a document is often the same person who discussed the deal, agreed the price and understands what the company is committing to. There is very little room for confusion because everyone who matters is already in the conversation. That changes once the business begins to grow. A sales lead may agree commercial terms with a customer. Someone in operations may appoint a vendor. Finance may open accounts or deal with payment providers. A country manager may be expected to move quickly without sending every document back to the founders. At that point, the company needs more than a general sense that certain people are trusted. It needs a clear understanding of what each person is actually allowed to approve and sign.
The question is bigger than who holds the pen
Founders sometimes approach signing authority as though the only issue is whose name appears at the bottom of the contract. In practice, the more useful question is who was allowed to make the decision in the first place. A sales manager may be allowed to agree a normal customer discount but not a promise that exposes the company to unusually large liability. A finance lead may be able to approve ordinary operating expenses but not take a loan on behalf of the business. A senior employee may negotiate a deal from beginning to end and still need a founder or director to approve one part of it before the agreement is signed.
That distinction matters because companies do not get into difficulty only when an unauthorised person signs a document. Problems also arise when someone with signing access makes a decision that should have gone through a different approval process. A contract can therefore be signed correctly and still expose a weakness in how the company makes decisions. The sensible approach is to think about approval and signature together. Who is allowed to agree the commercial point? Who needs to review anything unusual? Who gives the final approval? And who is then allowed to sign for the company?
Authority should follow the way the business actually works
There is no need to make this complicated. A startup with twenty people does not need the same approval manual as a bank with thousands of employees. What it does need is a system that matches the decisions its team is already making. If the head of sales closes ordinary customer contracts every week, the company can decide what an ordinary contract looks like and how far that person can go without further approval. If operations regularly appoints vendors, the business can set a spending level or identify the kinds of commitments that need a founder to step in.
Money is only part of the picture. A contract for a relatively small amount can still create a serious problem if it gives away important rights, contains a long lock in period or makes the company responsible for risks it would not normally accept. A useful approval system should therefore look beyond financial limits. The company should also identify the decisions that matter because of what they could do to the business. Borrowing money, giving security over company assets, licensing core technology or agreeing to exclusivity with a major partner may deserve a higher level of attention even where the immediate cash value looks modest.
Investment can change the answer without changing the people
A company can finish a funding round with the same founders, the same team and the same office, but the way some decisions are made may have changed. Investors may have agreed that certain matters cannot be decided by the founders alone. For example, the company may need board or investor approval before issuing new shares, taking on debt above a particular amount, selling a major asset or entering a transaction outside the ordinary course of business. Lawyers often refer to these as reserved matters, but the practical point is simple: some decisions have been taken out of the normal day to day discretion of management.
Those rules are only useful if the people running the company know they exist. The finance team does not need to memorise the shareholders agreement, and the sales team does not need to become familiar with board procedure. The founders do, however, need to translate important approval rules into the way the business operates. If a proposed loan now needs board consent, finance should know when to flag it. If a major licensing arrangement needs investor approval, whoever manages partnerships should know not to promise it before the approval has been obtained. Good governance becomes much more practical once these rules stop living only in legal documents.
Electronic signing has made one part easier and another part easier to overlook
Digital signatures have made execution faster. A founder can sign from an airport, a director can approve a document from another country, and a contract can move from final draft to signed copy in a few minutes. That convenience is useful, but it can create the impression that signing access is the same thing as decision making authority. It is not. The fact that someone has access to the company signing account, a scanned signature or an electronic signing platform does not automatically mean they should use it for every document that reaches them.
The controls around signing can remain simple. Access should sit with the people who actually need it. When an employee changes role or leaves the company, signing access, bank mandates and approval rights should be updated rather than left in place by default. For an important transaction, the company should also keep a record of any approval that was needed before signature. Months later, when an investor, auditor or counterparty asks who approved the deal, it is far easier to produce a short written record than to reconstruct the decision from old messages.
A growing company should be able to explain how a commitment was made
The aim is not to create bureaucracy around every contract. Startups need to move quickly, and a system that requires the founders to approve every software subscription or ordinary customer agreement will soon become a bottleneck. The better approach is to decide which decisions can happen routinely and which ones need to move upward. That gives the team enough room to operate while preserving control over commitments that could materially affect the business.
As the company grows, this becomes part of building an organisation that can function without every decision living in the founders' heads. A clear signing and approval structure tells employees how far they can go, gives founders visibility over the decisions that genuinely require them and makes it easier to show investors that the company is being run deliberately. The question is therefore not simply who can sign. It is whether the company has made it clear who can commit it, on what terms and when someone else needs to be brought into the decision.
This article is general information and not legal advice. For guidance on your specific circumstances, speak with us directly.