Why Startups Should Host Board Meetings

A Board Meeting is a formal meeting of the Board of Directors of a corporation and any invited guests or observers. These meetings are essential gatherings of the Directors, at which officers present updates about company progress and Directors discuss key issues and challenges, review performance, consider policy issues, and address major problems. Additionally, at Board meetings, Directors vote on important business matters and approve high-level corporate action. These meetings are usually presided over by a chairperson of the organization (often the CEO). The finalized and approved record for a Board meeting is called the minutes, a legal document published according to the rules governing that Board's operations.If your company has one or more Directors who represent investors, Board meetings are also a useful way to keep those investors up to date and maintain strong relationships. Officers can ensure the investor Director understands the corporation’s financial needs and growth projections. Additionally, Directors may have strategic connections that can help advance the corporation’s business initiatives.

Board Meeting Best Practices

Each state has its own requirements for Board meetings. Delaware General Corporation Law (DGCL) has flexible requirements. For example, in Delaware:

• there is no prior notice requirement for calling a Board meeting;
• the minimum number of directors for a quorum is one-third of the directors;
• actions by the Board require a simple majority vote of the directors at a meeting with a proper quorum;
• Board meetings may be held telephonically if all participants can hear and be heard; and
• meetings need not be held in the State of Delaware.

A corporation’s Bylaws may require additional procedures or requirements on the number, frequency, and mechanics of Board meetings. In general, it is best practice to hold meetings at least quarterly, including one annual meeting to review and discuss more substantial goals and targets. It is also common to notify Directors about a Board meeting several weeks prior to the meeting (although the Bylaws may only require notice at least 24 hours prior). Meetings can often be called by either the Chief Executive Officer or by the number of directors that would constitute a quorum. So, for example, if a company has a seven-member Board, the CEO can send an email to all seven directors 24 hours before the proposed meeting, and if three Directors join the meeting, affirmative votes from only two of those directors at the meeting are needed to take any proposed action at the meeting.

Written Consents Versus Formal Board Meetings

Board meetings allow companies to review and approve matters requiring the Board’s consent in a consolidated manner and at one time. However, they’re not always the best avenue to decide certain issues. Company Bylaws often authorize the Board to approve business action items through written consent. Written consents are useful (1) in the earlier stages of a corporation, when the Board is small and may not need to host formal Board meetings, (2) to approve urgent or routine business matters that might not warrant a formal Board meeting or (3) if the Directors cannot otherwise align schedules. Unlike consents effected at a formal Board meeting, however, written consents must be unanimous. This means that a corporation must corral signatures from all Board members on a formal written consent fully detailing the items approved by the Directors.In any situation involving controversy or a potentially divided Board, best practices suggest holding a meeting instead of using a written consent, both to provide for greater discussion of the issues and to mitigate against the risks of one or more directors failing to sign the written consent. In addition, a meeting provides a chance for management to go on the record with its support of a particular action, since management's participation in a meeting would be reflected in the minutes. Finally, remember that fostering strong relationships between management and Directors at Board meetings is essential to the success of the business. Even if the Board only needs to address routine action items, it may be worthwhile to schedule a formal Board meeting to provide opportunities for productive engagement between the management and the Board.Whether your Board approves action at a Board meeting or via written consent, it is worth clearly and thoroughly documenting approved items in some form of written resolution to provide evidence to third parties doing due diligence (such as future potential investors) that a company's Board appropriately supported a corporate action.

Get Help Running Effective Board Meetings

To help ensure that your Board meetings run smoothly, Fourscore is pleased to offer legal services that will help you organize and facilitate effective meetings. Read more about our Board Meeting Subscription Services, and talk to a Fourscore attorney for more information.Headquartered in the Research Triangle region of North Carolina, Fourscore Business Law serves entrepreneurs and businesses in the Triangle, throughout the Southeast and in Silicon Valley / San Francisco. We also represent venture capital funds and other investors who invest in companies throughout the U.S. The idea of delivering maximum impact in a simple and succinct manner is what we’re calling the Fourscore Principle. And that is what Fourscore Business Law is based on. Our clients operate in a broad range of industries including tech, IoT, consumer products, B2B services and more. Questions? Shoot us an email or give us a call at (919) 307-5356. Your first call is on us.