Why does your corporation need a Board of Directors? The glib answer is that the statute requires you to have one. The real reason is that the Directors “run” the corporation; that is, all decisions made on behalf of the corporation (with exceptions, of course) are made in the “name” of the Board of Directors. Presidents, CEO, whatever you call your chief officer, derives his/her authority from a delegation of authority from the Board, but ultimate responsibility for all decisions of the corporation finds its way back to the Board.
Board of Directors Duties
The Board sets long range goals for the business, authorizes spending, product development, sets strategy. And finally, the Board declares if a dividend will be paid. Now, it used to be up to “tradition” as to what decisions the Board would make, versus the shareholders or corporate officers. That quite obviously resulted in lots of disputes among the three groups, because ambiguity is not always a good idea when setting lines of demarcation between parties and their rights.
When I draft Bylaws for my clients, or update old Bylaws, I work with them to apportion decision making among these three groups and their competing interests, generally in accordance with the traditional roles of these groups, but also with an eye to keeping liability for corporate actions away from shareholders and on the Board where it belongs.
The main decisions directors make are generally broad: what long range course should the business take and who are the best officers and key employees to implement that vision; what money should the company spend towards that goal; what large financial expenditures need to be authorized by the Directors; and should new shares and/or shareholders be allowed into the company.
There are of course many more, these are just examples of the Board’s authority.
Contact me if you have any questions on business transactions. In western North Carolina, Asheville, Waynesville, Hendersonville at (312) 671-6453.
Email me at: palermo@palermolaw.com.
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