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Startups are required to have Board meetings, but they don’t have to have boring and bad.[1] Let’s talk about the legal requirements for a startup’s Board, and then let’s go over some suggestions on how to improve your Board discussions.
A company’s shareholders appoint its Board of Directors. The Board then decides how to handle big-picture issues facing the company. Most important company decisions require Board approval. Want to appoint officers? Get Board approval! Want to issue stock? Get Board approval! Want to amend your Charter? You guessed it, Board approval! You get the picture.
But in addition to the specific legal requirements for your Board, there are a number of cultural and logistical issues to keep in mind whenever the Board gets together. Here are a few to consider:
First, there should be no surprises. Board members should never hear bad news for the first time during a meeting. Instead, give your directors materials in advance.[2] If there are controversial topics or issues then discuss them with individual directors prior to the meeting. Once the meeting starts, be upfront about your company’s challenges – your Board is there to help, not to scold.[3]
Second, set an agenda. Give the agenda to your directors prior to the meeting so they know what’s going to be discussed. People love to talk, and a simple agenda is essential to keep the meeting moving along. The most important things should be discussed early in the meeting, to make sure there’s enough time to adequately address them.
Third, use a standard set of slides to present company information to your Board. Lots of companies have a standard dashboard with metrics that’s updated prior to each meeting. This lets directors see how the company is progressing. If you set goals, let the directors know whether you met them. Bring in company employees to present about specific projects or metrics.
Fourth, try to build relationships. Board dinners following the meeting are a great way for the directors to get to know each other. The more comfortable your directors feel with you and each other, the more excited everyone will be to engage and collaborate during future meetings.
Last, don’t forget the legal stuff. If you need to approve option grants, material agreements, executive compensation and so on then be sure to include it on the agenda and vote on it at the meeting. If your attorney attends your meetings, then they can handle this part. If not, be sure to check with them to make sure you approve everything correctly and to ensure the votes are recorded in the meeting minutes.
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[1] An important reason to hold Board meetings is to maintain your liability protection. The main reason you formed a legal entity for your startup was to benefit from limited liability – meaning if someone sues your business they can only get at the business’s assets, as opposed to going after your personal assets like your house or car. But if you don’t treat your business like a real company then a court won’t either. This is called “piercing the corporate veil.” If your business doesn’t have its own bank accounts, observe corporate formalities (like Board meetings!) and function separately from you as an individual then you could lose its limited liability protection.
[2] Keep in mind that circulating pre-meeting materials is only useful if the directors take the time to read and process them. Make sure your directors are doing their homework! Incentivize them with cash or stock to keep them engaged with the business. If there are specific issues that you want input from certain directors on related to their expertise, let them know in advance that you’ll want them to weigh in during the meeting.
[3] Don’t be scared to communicate your expectation that discussions held at Board meetings be productive, polite and cooperative. Constructive criticism is essential, but the critiques should be professional and civil.
Christopher Poe is an attorney at Wyrick Robbins. His practice focuses on startups and generally helping businesses of all sizes and in all stages of development, from organization to exit. He can alleviate the headaches caused by founding and growing a startup business and scaling it to exit.
The purpose of this brief is to provide general information, and it is not intended to provide, and should not be relied upon as, legal advice.
