September 9, 2014 | Business Plans
A corporate business owner with partners is knowledgeable about what it takes to keep the company running smoothly, but is often unaware of the statutory requirements for a board of directors. Someone with the title of president or chief operating officer may disregard the fact that the business is ultimately run by a board of directors, while in the pressure of making day-to-day decisions.
A Dozen Potential Requirements
Corporate documents must spell out how the directors are elected and define the duties of the board. The corporation must also stick to the statutory requirements of how to operate. These requirements could include:
- The number of directors
- The election and term of directors
- The classification of directors
- What happens when there are vacancies
- How to remove a director if necessary
- Any quorum requirements for board meetings
- Definition of action of the board
- Time and place of board meetings
- How board members will receive notice of meetings
- The executive committee and other committees
- Liability of directors in certain cases
- Other issues
Business owners need to set up these terms and conditions and make sure they follow statutory guidelines.
The Importance of Board Resolutions
It is crucial that a president or operating officer not make decisions without having the consent of the board. Many times, owners decide to make unilateral decisions in what they think is the best interest of their companies, but the decisions end up being bad. This can lead to disputes as to whether the person making decisions actually had the right to act. Without board resolutions to support decision making, a business partner making unilateral decisions can get into trouble.
Therefore, the best way to go is to have the board resolve to do certain activities and for the officers to see these activities through. A board resolution defines any decisions the board makes and also proves that the board is running the company. Officers are empowered by the resolutions, and evidence is provided that the corporation is following proper procedure.
Types of Decisions a Board Makes
The board of directors makes a multitude of decisions involving a business. Some types of these decisions might include the election of officers, financial decisions including expenditures, tax matters, employee issues, vendor decisions and legal issues.
The board may conduct an annual meeting as well as specially scheduled meetings. They must provide proper verification of notices, take attendance, have quorums, record actions taken as well as the minutes of each meeting.
Speak with Filler & Associates for more information about board meetings and resolutions to ensure your company is following proper procedures.