Your company`s code of ethics typically addresses issues such as honesty, integrity, acceptance of tips or material benefits, compliance with OFAC and other laws, as well as prohibitions against unlawful discrimination, sexual harassment, and misconduct that apply not only to company personnel, but also to directors. Co-founders should keep their initial legal agreements fairly simple, taking into account two key figures: remember that your financial investors don`t have to join your board of directors. In addition, board members can fulfill four roles: board member, advisory board member, board observer (a non-voting member attending meetings) or a non-active board member. To create a board of directors for your start-up, look for the most experienced people in the company.9 min Read What does and does not require board approval depends on the company and the company`s statutes. If this is a high-level decision, it will likely need to be approved by the board. Since board members make the most important decisions about a company, it is essential to know who sits on the board. It`s incredibly important to make sure those on the board know the industry and the company they work for. The structure of the board will likely change over time and vary by company, but there are standard approaches for startups. It is common for companies to elect an odd number of board members in order to reduce the risk of a tie vote. Your startup`s board of directors exists to run your business. These are not the pieces filled with scotch and cigars where the rich share the fortune among themselves, especially in a startup.
If your company brings in investors, you expect at least one investor representative to be appointed to the board of directors and it is virtually certain that each of these investor representatives will require a compensation agreement before serving on the board of directors. The board of directors is responsible for things such as setting high-level goals for the company, hiring the CEO, issuing shares, and releasing dividends. Remember that your management team oversees all day-to-day operations, while the board only monitors executives and the CEO. Another way to protect your directors is to have a written agreement with any director that prohibits any retroactive removal of “expense advance fees” allowing a director to recover from the company the fees and expenses personally presented by the director for the good of the company. Especially among startups, business creators (who are usually managers or directors of LLCs) often present funds for the company in the early stages of the company`s activities. . . .