What are the steps?
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.
How to do it
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.
Step 3: Execute a Director’s Service Contract
Finally, have the Director sign a Director’s Service Contract (if the company is hiring a director as an employee). However, if this is not the case, you can use a simpler Non-executive Director’s Letter of Appointment.
