Substitute Signatory: A Practical Guide For Australian Businesses And Startups

If you run a small business or startup, you probably sign a lot of documents. Customer contracts, supplier terms, leases, banking paperwork, NDAs, employment documents, shareholder paperwork - the list adds up quickly.

So what happens when the usual person who signs is unavailable? Maybe your director is overseas, a co-founder is on leave, or the person authorised to sign is tied up during a critical transaction.

This is where having a substitute signatory can help. Used properly, it can keep your business moving without causing legal uncertainty. Used poorly, it can create disputes, delays (like a bank or counterparty refusing to accept the signature), or issues with whether the document has been properly executed.

In this guide, we’ll walk you through what a substitute signatory is, when it makes sense, the common legal risks, and the practical steps you can take to set your business up to sign documents smoothly (even when your usual signatory is unavailable).

What Is A Substitute Signatory (And Why Does It Matter For Your Business)?

A substitute signatory is someone who signs a document instead of the person who would ordinarily sign it - typically because the usual signatory is unavailable, or because your internal processes require a different authorised person to execute the document.

For small businesses, the “usual signatory” is often:

• a sole director
• one or two directors who manage day-to-day decisions
• a founder with authority under a delegation policy
• a company secretary (in some cases)
• an authorised manager (for operational contracts)

The big issue is this: a signature only works if the signer has authority.

If the person signing doesn’t have authority (or can’t show authority), the other side may argue:

• the contract was never properly formed,
• your business isn’t bound (or you’re bound in a way you didn’t intend), or
• the signatory is personally liable (depending on how they signed and what was represented).

That’s why this isn’t just an “admin fix”. It’s a legal and risk-management issue - especially for startups doing fundraising, entering major supplier deals, or signing a commercial lease.

When Would A Startup Or Small Business Use A Substitute Signatory?

Most businesses don’t think about substitute signatories until they need one urgently. In practice, it comes up more often than you’d expect.

Common Scenarios

• Founder or director is unavailable (travel, illness, leave, time zone issues).
• Fast-moving deals where timing matters (investment term sheets, customer onboarding, tenders).
• High-volume contracting where a CEO/founder can’t sign everything.
• Internal controls requiring two-step approvals (e.g. one person approves, another executes).
• Banking/finance transactions where a lender insists on specific signing requirements.

Examples In The Real World

Example 1: Your SaaS startup is closing a key enterprise customer. The customer’s procurement team wants a signed agreement by close of business today. Your CEO is on a flight. If you have a pre-approved substitute signatory process, the deal can close on time.

Example 2: Your business is buying equipment under finance. The lender requires the company to execute the documents correctly and may refuse documents signed by someone without clear authority.

Example 3: You’re entering a lease and the landlord insists on execution in a specific way. If the person signing isn’t the right person, you can lose the premises (or have to re-do the entire signing process).

In all of these situations, the issue isn’t whether someone can physically sign - it’s whether the signing method and signatory authority are legally acceptable and commercially workable.

How Do You Appoint A Substitute Signatory In Australia?

There isn’t one universal substitute signatory rule in Australia. How you properly appoint (or recognise) a substitute signatory depends on:

• your business structure (company vs sole trader vs partnership)
• your internal governance documents (constitution, shareholder arrangements, delegations)
• the type of document being signed (routine contract vs deed vs finance document)
• what the counterparty will accept

If you operate through a company, it’s also important to separate (1) who has authority to bind the company, from (2) whether the document has been executed in a way that gives the other side confidence it’s binding. In Australia, many counterparties prefer execution under section 127 of the Corporations Act 2001 (Cth) because it can allow them to rely on statutory assumptions about proper execution. But execution under section 127 isn’t the only way a company can enter into a contract.

Below are the main practical pathways small businesses and startups typically use.

1) Authority Set Out In A Company Constitution Or Internal Governance

If you operate through a company, your governance documents often determine who can do what. That may include signing rules or the ability for directors to delegate authority to someone else.

Where your company has a tailored Company Constitution, it may include helpful mechanics around decision-making and execution authority (including how directors can appoint agents or delegates). Even where it doesn’t spell out “substitute signatory” in those words, it often provides the framework for approvals and delegations.

2) A Board Resolution Or Director Resolution

For companies, a common and practical approach is to document authority by resolution. This can be especially useful when:

• you want a specific person authorised to sign specific documents (or up to a value limit), or
• you need a clean evidence trail to show a bank, landlord, investor, or large customer.

For example, a resolution might authorise your COO to sign “all supplier agreements up to $50,000” or “the lease documents for ”.

Even for startups with a small team, this step can remove a lot of friction later - because you’re not scrambling to “prove” authority when everyone is in a hurry.

3) An Authority To Act (Letter Of Authority)

Sometimes you need something that is easy to show the other side (especially where the counterparty isn’t familiar with your internal governance). In those cases, a written authority document can be helpful.

This might be done as a letter of authority or other authority instrument that clearly states:

• who is being authorised (the substitute signatory)
• who is granting the authority (director, board, business owner)
• what they can sign (scope)
• any limits (time limits, value limits, document types)
• how they must sign (e.g. “for and on behalf of” the company)

Authority documents are especially useful where you anticipate repeated signatures, or where you’re dealing with counterparties that require formal proof before accepting a signature.

4) Company Execution Under The Corporations Act (s127) Vs Agent Authority (s126)

For companies, it helps to understand why some counterparties get strict about signing.

Under section 127 of the Corporations Act, a company can execute a document (including a deed) without using a common seal if it’s signed by:

• two directors, or
• a director and a company secretary, or
• for a proprietary company with a sole director who is also the sole company secretary - that sole director.

When a document appears to be executed under section 127, the other party may be able to rely on statutory assumptions (under section 129) that the document has been properly executed, without having to investigate your internal approvals. That’s why banks, landlords and larger corporates often insist on section 127 execution.

However, companies can also enter into contracts through an individual acting with the company’s express or implied authority (including through an agent), and section 126 specifically recognises that a company can make a contract through an individual acting with its authority. The practical issue is that, outside section 127, the counterparty may ask for clearer proof of authority (like resolutions or authority letters) before they’ll accept the signature.

5) Agent Signing “P.P.” Or “For And On Behalf Of”

You’ll sometimes see signatures written as “p.p.”, which is shorthand commonly used to indicate signing on behalf of someone else (for example, an assistant signing on behalf of a director).

This can be valid in the right circumstances, but it’s not a magic phrase. The real question is still: did the business authorise that person to sign?

If your business uses p.p. signing, it’s worth ensuring your team understands what it means and when it’s appropriate. The signing format should match the authority you’ve actually granted, and you should avoid it where the counterparty expects execution by directors or requires specific execution methods.

If you’re unsure how p.p. signing works in practice, it can help to get clear on p.p. signatures and the risks of using them casually in business documents.

Substitute Signatory Risks: What Can Go Wrong If You Get It Wrong?

A substitute signatory can be a great operational tool, but the risks are real. Here are the most common ways we see it go wrong for small businesses and startups.

The Counterparty Refuses To Accept The Signature

This is more common than many founders expect.

Even if you believe your substitute signatory has authority, the other party may not accept it without documentation (like a resolution or authority letter). This can cause:

• delays in closing a deal
• missed settlement dates
• loss of negotiating leverage
• extra legal spend redoing documents

The Document Is Not Properly Executed (Especially For Deeds)

Some documents are more sensitive than others. Deeds, certain finance documents, and some property-related documents often have stricter execution expectations.

If execution is defective, the document may still operate as an agreement in some circumstances, but you can end up with uncertainty, enforceability arguments, or the need to re-execute - which is the opposite of what you want after spending time negotiating it.

The Substitute Signatory Exceeds Their Authority

This is a big internal risk.

Even a trusted employee can misunderstand scope under pressure - especially if:

• authority isn’t clearly documented,
• there’s no approval threshold, or
• the signing process is informal (e.g. “just sign whatever comes through”).

This can lead to the business being locked into unfavourable terms, unexpected liabilities, or contracts that don’t match your commercial strategy.

Personal Liability Or Misrepresentation Risk

If someone signs in a way that suggests they are personally a party to the contract - or they represent they have authority when they don’t - they may face personal exposure.

While outcomes depend on the exact facts and document wording, it’s not something you want to leave to chance. Clear signing blocks, clear authority, and proper internal processes all help reduce this risk.

Governance Problems In Fundraising Or Due Diligence

If your startup is raising capital, sophisticated investors will often review:

• who signed key contracts,
• whether your approvals were properly documented, and
• whether there are “loose ends” in governance.

Governance issues rarely kill a deal outright, but they can slow it down, increase legal costs, or become a negotiation point.

Practical Tips: How To Set Up Substitute Signatory Processes That Actually Work

The best substitute signatory processes are the ones you set up before you’re under pressure to sign something today.

Here are practical, business-friendly steps you can implement.

1) Create A Simple Signing Policy (Even If You’re Small)

You don’t need a 30-page manual. For many startups, a one-page policy is enough to start.

It should cover:

• who can sign what (by role)
• approval limits (e.g. $5k / $25k / $100k thresholds)
• which documents must go to a director (leases, finance, IP assignments)
• how signing is done (electronic, wet ink, counterparts)
• where signed copies are stored

This is particularly helpful once you start hiring and delegating - because your business can scale its contracting without losing control.

2) Use Clear Contract Templates For Routine Deals

Substitute signatories work best when the contract terms are already controlled.

For example, if your team uses standard customer terms, it’s easier to safely delegate signing (because you’re not negotiating bespoke risk-heavy clauses every time). This is where well-drafted Service Agreement templates can reduce the chance that a substitute signatory accidentally agrees to something outside your risk appetite.

3) Think About Privacy And Online Terms If Your Team Signs Up Customers Digitally

Many businesses don’t “sign” in the traditional sense - customers click “I agree”, accounts are created online, and onboarding flows are automated.

Even then, you still need a clear legal framework for what customers are agreeing to, and who in your business can approve changes to those terms.

If your startup collects personal information (even just names and emails), it’s also important to have a Privacy Policy in place and to treat updates to that policy as something only authorised people can approve.

4) Make Sure Employment And Delegation Structures Match Reality

If you’re delegating signing authority to a manager, ensure their role and responsibilities align with that authority.

It’s much easier to justify signing authority where your internal documentation (and expectations) are consistent. For example, if a senior employee is responsible for supplier relationships and procurement, it’s sensible that they may be authorised to execute supplier contracts within limits - and those expectations can be supported by a well-structured Employment Contract.

5) Keep Evidence Trails (Because You’ll Need Them At The Worst Time)

When a signature is questioned, you want to be able to quickly produce evidence of authority without digging through old emails.

Practical ways to do this include:

• keeping a register of delegations/resolutions
• saving authority letters in a central folder
• ensuring contracts are stored with version control and signing records

This makes your business more resilient - not only legally, but operationally.

6) Don’t Forget Shareholder/Founder Governance

In startups, signing authority issues often overlap with founder and shareholder decision-making (especially where there are multiple directors or investor-appointed directors).

For example, you may have agreed that certain decisions require founder approval or board approval, even if someone else is doing the day-to-day signing.

This is where a tailored Shareholders Agreement can help align expectations around decision-making, approvals, and control - which reduces disputes later when the business is growing quickly.

Key Takeaways

• A substitute signatory is someone who signs documents in place of your usual signatory, and the key issue is always whether they have the right authority (and can show it).
• Substitute signatories are common in fast-moving small businesses and startups, especially when founders are unavailable or contracts need to be executed quickly.
• For companies, counterparties often prefer execution under section 127 of the Corporations Act, but companies can also sign through an authorised person or agent (including under section 126) - the key is making authority clear and fit-for-purpose for the document type.
• If you get substitute signatory arrangements wrong, you risk deals being delayed, documents being rejected, or execution disputes that create uncertainty and rework.
• The most practical approach is to set up simple signing policies, clear delegation limits, and strong contract templates early, so your business can scale without losing control.

If you’d like a consultation on setting up substitute signatory processes and signing authority for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.