Do I need to hold board meetings?
In most early-stage startups, the initial members of the board of directors (usually the founders) tend not to hold formal meetings. Founder-directors often work in close proximity to each other and are able to meet and make decisions as needed. Well-advised founder-directors usually document major corporate decisions as actions by unanimous written consent.
When a company raises money and an investor-director joins its board, the company will typically begin to hold regular formal board meetings on at least a quarterly schedule. Another common practice at this point is to hold formal board meetings every other month. In between formal board meetings, the executive officers of a company are often in frequent contact with the company’s board members.
Regular board communication plays an important role in good corporate governance. The board of directors of a company is responsible for the general strategic direction and oversight of a corporation. Board meetings allow directors to gather, discuss the business, meet with the executive officers of the company, and make informed, major decisions in fulfillment of the directors’ duty of care to the company.
What happens during a board meeting?
It is important to follow any notice procedures and quorum requirements when holding board meetings. These procedures and requirements are usually outlined in a company’s bylaws. In more complicated corporate situations, giving improper notice of a board meeting may result in an invalid meeting at which no business can be conducted. Similarly, there must be a quorum of directors (a minimum number of board members in attendance) at any board meeting in order for matters to be validly approved.
Leading up to a board meeting, a company will typically prepare an agenda, a board slide deck, financial reports, minutes from prior meetings and other related documents. Prior to any board meeting, the company should distribute these materials to the board so that directors have an opportunity to review the materials before the meeting.
Although practices may vary from company to company, board meetings will usually cover the following topics:
- A CEO update to the board on the overall status of the company since the last board meeting
- A review of financial results and related trends
- Detailed reports from the company’s senior executives covering the company’s major functional business areas, such as engineering, product development, sales and marketing, recruiting, etc.
- Strategic goal setting and planning
- Corporate housekeeping, such as approval of stock option grants and prior meeting minutes
Board meetings may also have an executive session, attended only by non-employee directors, so that the investor-directors and any independent directors can continue business discussions or speak about more sensitive issues like management team performance and compensation.
Do I need to take notes during a board meeting?
Board meeting attendees often take informal notes for personal use. It is good corporate practice to keep formal written minutes of each board meeting to document the fact that a valid board meeting took place, and to document any board approvals. Board minutes are customarily drafted by a company’s counsel, who either attends each board meeting, or bases the minutes off the agenda, the board slide deck, and the personal notes of attendees if any were taken.
Board minutes will typically include the following information:
- Date, time and location of the meeting
- The type of board meeting (e.g., regular, special)
- A summary of attendance (e.g., directors present, directors absent, executives, observers, and other guests) and whether a quorum was established
- High-level summaries of what was discussed (should not include sensitive information)
- Documentation of board resolutions and approvals (e.g., stock option grants and prior meeting minutes)
When is board approval required?
Certain board approvals may be required by law, or by a company’s governing documents or financing agreements. In general, a company’s board of directors should approve material actions that are outside of the company’s ordinary course of business. These actions include:
- Amending governing documents, including the company’s certificate of incorporation or bylaws
- Issuing securities, such as common and preferred stock, options, warrants, convertible notes, SAFEs, or amending terms of any securities
- Setting up equity incentive plans and approving stock option grants
- Appointing or removing executive officers or directors
- Entering into major corporate transactions (e.g., mergers, asset sales or purchases)
- Entering material contracts, such as exclusive licenses or high-monetary-value contracts
- Creating board committees or delegating board authority
- Taking out bank loans or amending the terms of existing debt
- Materially changing the compensation of key members of the company’s executive team
If in doubt, companies should consult with their counsel when determining whether an action requires the approval of the board of directors.