Mature companies have formal boards of directors.
A board of directors manages “the business of a corporation.” BCL § 701. The board establishes binding resolutions for the corporation and appoints and controls corporate officers.
With a formal board of directors there is a built-in discipline and objectivity that provides the foundation to maintain and grow the business.
Although every business needs that discipline and objectivity, many smaller, emerging, and family businesses do not have a board of directors. Often those businesses do not yet have the understanding or formality in place to set up a board.
But it is those businesses – smaller, emerging, or family business – that need a board the most. They crave the foundation to maintain and grow the business.
An advisory board can be a perfect interim step toward setting that foundation.
Advisory boards provide non-binding strategic advice, outside perspective, and fill knowledge gaps. The board members serve voluntarily (although they could be paid) and have no fiduciary responsibility.
This board is a good intermediate step before putting a true board of directors in place who would have the power and responsibility for managing the company. '
In essence, an advisory board is a good test drive for the more formal board of directors required later, when selling, going public (IPO) or upon the interest of venture capital investors or lenders.
For more information about this article or other issues, please contact us The Bachman Law Firm PLLC at firstname.lastname@example.org or 845-639-3210.