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Startup Guides Published:  Aug 17, 2023 7 min read
Expert reviewed

Startup boards explained and tips to manage your board

Every busy founder needs a brilliant board on their side to govern the company well and make decisions that will guide it towards success and protect all stakeholders.

In this article, we’ll explain what a startup board’s responsibilities are, what to pay them and how to ace the admin.

In the article:

What is a startup board?

A startup board is a group of directors that govern the company. They oversee operations, give strategic guidance and protect all stakeholders. A board of directors usually has a diverse set of skills, expertise and industry knowledge relevant to the startup.

Every private company must have at least one director. At incorporation, you decide who your director(s) will be. All directors taken together make up the board. If you’re just a solo founder at the moment, don’t worry. A board can consist of just one director. You add to your board as your company grows. The goal is to build a robust board of directors that supports the governance and growth of the company with a holistic set of perspectives and expertise.

A well-structured and engaged startup board supports the company’s success and helps you navigate challenges and opportunities.

Startup boards have to agree on all company decisions. To reach an agreement, the board can either get together and decide on something by majority vote or pass a written resolution without a meeting if they agree on something unanimously. It’s a requirement that all board decisions are documented.

You can delegate some board responsibilities to an individual executive director or a committee. For example, finance-related functions would typically be delegated to chief financial officers. When one of the directors is authorised to exercise a power e.g. enter into supply agreements, the board doesn’t have to hold a meeting or pass a written resolution any time the company needs a supply agreement. The directors who have authority can go ahead and exercise their specific powers.

Who should be on a startup board?

Anthony Rose

Aim to have people on the board who are truly invested in the success of the company and who will complement the knowledge and experience of the founders. For example, if the founders are mostly technical experts, you should aim to have other directors who can help with financial expertise, business growth, partnerships and sales.

Remember, the board is about governing the company, not getting advice, and it should be founder-led rather than investor-led. Investors sometimes want a different outcome than the founders, so remain in control of your own company and ensure that you have more of a say in who’s on the board than your investors.

Anthony Rose

CEO & Co-founder,

SeedLegals

Do all founders get a seat on the board?

Not all founders have to have a seat on the board. At SeedLegals, we recommend that if there are just two or three founders, you all have a seat on the board. If there are more founders than that, we recommend that those with the largest shareholding have seats on the board.

Why? Because founders are more invested in the running and success of the company than outsiders and usually have more shares than anyone else. When founders are made board directors, they have the ability to shape the company and they’re in the best position to do so because they’re immersed in the day-to-day of the company. Founders are in a better position than anyone else to run the board and the company.

Anthony Rose

In general, if your company has one to three founders, you should all have a seat on the board to remain in control, particularly in the early stages. You can revisit it around the Series B stage, when perhaps your lead investor has more equity than some of the founders.

Anthony Rose

Co-founder & CEO,

SeedLegals

Should any investors be on the board?

When you raise startup funding from investors, the lead investor from your funding round will usually ask for a seat on the board. Investors typically have specialised knowledge that can add great value to your board, and they generally ask for a board seat so that they can have a say in company decisions and the strategic direction of the company. Think carefully when selecting investor directors and consider factors such as the value they will add, the stage of your company, shareholder weight and board composition.

Raising funding? SeedLegals helps you sort the legal documents and close your funding round faster. Check out how we can help you:

What are the board’s responsibilities?

A startup board of directors is responsible for governing the company. They make decisions and guide the company’s strategic direction. They are obligated to act in the best interests of all the company’s stakeholders (shareholders, employees, investors, customers, suppliers, community, etc) and uphold high standards of corporate responsibility.

Their responsibilities are to:

  • represent the interests of the company’s stakeholders
  • set long-term objectives
  • ensure the company’s actions align with its mission and goals
  • create growth opportunities
  • mitigate risks
  • give advice to the company’s executive team
  • hold management accountable for achieving targets
  • decide on the executive team’s salary, benefits and share options
  • set up share option schemes
  • safeguard the company’s assets
  • ensure compliance with laws, regulations, and ethical standards
  • appoint the executive leadership team
  • make sure the management team operates in the company’s best interests
  • foster a culture of transparency and accountability
  • file annual confirmation statements
An annual confirmation statement is a document that you need to file with Companies House every year. It includes details about your company such as the address, details of directors and people with significant control.

Overall, the startup board is responsible for guiding the company towards sustainable growth and success while upholding the principles of good governance and ethical business practices.

How do you appoint board members?

To add a new board member, you should:

🧏‍♀️Determine the skills and expertise needed on your board and assess potential candidates who can contribute meaningfully to the company’s growth
🗣️Hold a board meeting to propose the appointment of a new director
âś‹Pass a board resolution or pass an ordinary shareholders resolution to appoint a new board member
đź“‚File an AP01 form with Companies to register the new director’s appointment.
📄And as always, don’t forget to look at your specific articles of association and follow to the relevant procedure set out there, which may differ from these steps

Read more about how to appoint and remove directors in our article How do I appoint and remove directors from my company?

You must notify Companies House about any changes to your board such as adding or removing board members and any change in a board member’s details. When you use SeedLegals for your board management, you can easily create, sign and store all the forms you need to add and remove directors and change a director’s details.

How much do you pay startup board members?

Startup board compensation is an important part of attracting and retaining top board members who can provide valuable guidance and governance of the company, particularly if the director in question is not a founder.

Startups may offer compensation in the form of equity, a salary or both. Awarding equity to board members helps to align them with company goals. How much you compensate your board members depends on what feels fair to both parties and what the company can afford.

How do you run a startup board meeting?

There’s no minimum number of board meetings prescribed by law, but directors should meet often enough to make sure that they are meeting their obligations and statutory duties as directors.

It’s common for startups to make one of the board meetings every year an annual review of progress against targets and to discuss high-level goals.

What are some top tips for effective board management?

So what does good look like when it comes to building a brilliant startup board? Read our tip tips below to find out.

 

Tips Effective Board Management 

Define clear roles and responsibilities
Establish clear roles and responsibilities for each board member. This includes defining the board’s purpose, outlining individual duties, and setting expectations for participation and contribution.

Share risk and reward
Make risky decisions together and share responsibility for them. Govern the company well and share in its success.

Anthony Rose

Imagine your company is planning a risky new expansion into a new product or territory that’s going to cost a fair fraction of the company’s cash reserves. If it doesn’t work out, the company could go bankrupt or face serious regulatory issues. That’s going to affect all stakeholders in the company negatively. That’s why big decisions need to be made collectively.

Anthony Rose

Co-founder & CEO,

SeedLegals

Encourage open communication
Create an environment where directors feel comfortable expressing their opinions, discussing challenges and offering constructive feedback.

Set strategic objectives
Work collaboratively to define the company’s strategic objectives and long-term vision. Regularly revisit and update these goals to align with market trends and the company’s performance.

Conduct board training
Invest in board training and development to make sure directors are well-informed about the industry, market dynamics, and regulatory changes. Continuous education helps them make informed decisions and remain effective in their roles.

Promote diversity and inclusion
Strive for a diverse board that includes directors from different backgrounds, experiences and expertise. A diverse board enhances creativity, better decision-making and a broader understanding of stakeholders’ perspectives.

Assess performance
Regularly conduct board evaluations to assess individual and collective performance. Use the findings to identify areas of improvement and tailor development plans for the board as a whole.

Encourage agile decision-making by swiftly responding to opportunities and challenges. Avoid lengthy bureaucratic processes that could limit the company’s ability to adapt to changing market conditions.

Focus on long-term value
Avoid short-term thinking and focus on creating sustainable long-term value for the company and its stakeholders. Make decisions that align with the company’s overall mission and strategic goals.

Use software to boost efficiency
Being organised and saving time makes things easier for everyone. When you use SeedLegals for board management, you can easily:

  • Set and share your board meeting agenda
  • Record your discussion using our Board Minutes template
  • Add outcomes to agenda items (Approved, Not Approved)
  • Sign the minutes
  • Add and remove directors (including automatic generation of forms)
  • Change the details of directors and automatically generate forms to send to Companies House
  • Create annual confirmation statements in minutes

Talk to an expert

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