For small businesses and startups —and large companies alike— how you set up your board of directors is essential. Chiefly, the board is responsible for governing a business, as well as setting the strategic direction. In the first instance, when you set up your board, it’s a good idea to look at the areas of knowledge or experience you are missing. Principally, this is a great way to decide what gaps you need to fill in your board.
Generally, startups often have just one board director. This is the minimum for a private limited company. However, as a business grows and takes shape, sharing the responsibility with additional board members often becomes necessary.
Here are the simple steps to set up your board of directors:
Step 1. Decide on a clear reporting structure.
Firstly, defining who reports to whom is an important first step. Oftentimes, a company will have a non-executive chairman to oversee the business; a managing director to run the business; a team of executive directors who report to the MD in areas like finance, marketing etc; and sometimes, non-executive directors to advise on strategy or give independent perspective for any grievances from shareholders.
Step 2. Consult the company constitution.
Ordinarily, the constitution of the company will detail the procedure for appointing company directors. Typically, you may use an ordinary resolution to appoint any board directors during a general meeting.