A countersignature is a second signature on a document that authenticates or confirms the first party’s signature. In an investment agreement, such as a Simple Agreement for Future Equity (SAFE), the investor signs first and the startup that’s receiving funds countersigns it. In high-value financial transactions, an internal countersignature might be required by the first signer’s supervisor to authorize a release of funds.

Countersignatures are necessary in many startup contexts, including when you create vendor contracts or employee offer letters. Below, we’ll explore why countersigning is important and how to include countersignatures in documents using digital tools.

Key takeaways

• A countersignature is a second signature provided by an internal authority or an external party that finalizes an agreement.

• Countersignatures are commonly found in fundraising documents, including SAFEs and convertible notes, and legal documents such as founder and shareholder agreements.

• Electronic signature (e-signature) platforms can help you collect countersignatures and maintain a digital audit trail.

What does countersigning mean?

A countersignature is a second signature on a document that confirms agreement, authorizes a first signature, or adds validation. Including a countersignature means that two separate parties or two members of the same organization have added their names to the document.

Countersignatures can come from a counterparty, an endorser, or an internal approver, depending on the document type and jurisdiction.

Here are examples for each scenario:

• Counterparty finalization: A board resolution might need the signature of the board chair and countersignature of the CEO to become final.

• Endorsement: A signatory can also verify the main party’s identity, often outside of a business context.

• Internal approval: A purchase order above a certain amount might require an initial signature from the employee who manages procurement and a countersignature from their supervisor.

Why do countersignatures matter in business agreements?

Countersignatures matter because they’re the final step in a sometimes complex process. They can help validate business agreements and, in some cases, make them legal or final. Some business agreements might not be able to go into effect until the countersignature is provided.

Businesses might require countersignatures as part of internal approval workflows before a contract becomes binding. A countersignature can also verify a signer’s authority or finalize an agreement when the other party signs the contract. Any delay in obtaining it could stall the receipt of small business capital or limit your business’s inventory, depending on the type of contract you’re finalizing.

What’s the difference between countersigned agreements and cosigned agreements?

Countersigned agreements include multiple signatures to confirm, authorize, or complete contracts. You can add your authority to a document by countersigning it. Meanwhile, the parties on cosigned agreements assume a shared financial or legal obligation, such as for repaying a debt or meeting the terms of a business agreement. Therefore, cosigning carries personal financial or legal responsibility.

As a founder, you might countersign a vendor contract that a representative from your supplier has already signed. That confirms the deal and initiates your business relationship with the supplier. But if you cosign a small business loan, you’ll guarantee the debt and be required to repay it if the primary borrower doesn’t. If you don’t pay, the lender could take legal action against you and the main borrower to collect on the debt.

When you fundraise and grow your startup, you’ll see countersignatures on a wide range of legal documents. A countersignature is often a formality required to complete a task that’s important to your business. If you’re asked to cosign an agreement, however, look carefully at its terms and ensure you’re comfortable with your obligations. As a cosigner, you’ll be providing a legal or financial guarantee that the main signer will meet the terms of the agreement.

Where do countersignatures show up in startup and fundraising workflows?

Countersignatures generally appear in the following startup scenarios:

• Company formation: A founders’ agreement, which explains equity splits and the division of responsibilities among cofounders, might require a first signature by the founder and a countersignature by a second person who represents the company.

• Raising capital: Fundraising with SAFEs in the pre-seed stage, convertible notes in seed rounds, and priced rounds in later stages could require your startup and the investor to sign funding agreements. When you issue equity during a priced round, countersignatures will also be necessary on stock purchase agreements and investor rights agreements.

• Hiring employees: Offer letters, employment agreements, and noncompete agreements might require signatures from both a company representative and the employee to be valid.

• Procurement: Company and vendor signatures could be required on vendor service agreements, onboarding documents, and compliance forms. An internal countersignature from a member of the leadership team can also be useful for approving large purchase orders.

• Corporate governance: Once your company’s board is established, documents such as certain board resolutions must include signatures from a company representative and a board representative. The company’s corporate secretary often takes responsibility for providing the countersignature on board documents.

Good recordkeeping is important as investors will expect to see signed documents on file. You’ll need a clear signature routing system and division of responsibility as to who in your company signs which documents. If you need support, consider choosing an accounting service or bookkeeping software to manage financial documents. A lawyer who specializes in startups can draft documents and clarify your legal obligations at each stage of fundraising and business formation.

How does countersigning typically work with e-signature tools?

Here are the steps to provide or collect a countersignature using an e-signature tool:

• Prepare the document: Create a final version of the document and determine who needs to sign it in the signature block—both internally and externally. Lock the document to ensure its contents don’t change and that all parties view the same version.

• Plan the order of signatures: Decide which party will sign first to signal their commitment and which will sign second to approve, endorse, or finalize the agreement. In an e-signature platform, lock the order so it’s not possible to collect a signature out of sequence. To avoid signing delays, you can define a group of potential signers (e.g. legal team) within your organization. So if one person is unavailable to sign, another authorized member can sign.

• First party signs: Route the agreement to the first recipient and request identity authentication if the document is sensitive enough to necessitate it. You can opt to receive a notification when the signer opens the document and when they sign it.

• Second party automatically receives the document: Based on your saved preferences, once the first party signs, the second party will automatically receive it for signature. The tool will collect the countersignature and record a time stamp.

• Finalize and store the document: Based on how the agreement is worded, it might go into effect as soon as the countersignature has been collected. When all signatures are finalized, store the signed version securely in a digital location where you can easily find it if an investor requests to view it. Be sure you have time stamps for all signatures to create a digital audit trail in case of a dispute.

What are some common countersignature mistakes to avoid?

Here are some common countersignature mistakes to avoid:

• Failing to provide a countersignature can render a contract void. For high-stakes documents such as arbitration agreements, this can create major legal issues in the future.

• Modifying the draft before countersignature can make a contract unenforceable as it creates uncertainty about whether all parties agreed to the same terms.

• If your organization’s signers lack clear authority to negotiate or execute the agreement, the other party may use that ambiguity to challenge the contract’s validity.

• Signatures collected out of order could create uncertainty about the contract’s effective date.

These issues appear most often during time-constrained negotiations, when the fastest solution isn’t always the best for your business’s recordkeeping.

To avoid execution problems, it’s worth deciding early on which team member will take responsibility for overseeing contracts, keeping clear records, and ensuring timely signing. E-signature tools often come with document tracking systems that can help you avoid missing signatures. You’ll want to confirm the signers’ authority beforehand and decide on a fixed effective date that’s written into the agreement. Proceed as though you’ll need to present these documents in court in the future so your archive is organized and complete.

How Stripe Atlas can help

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