Tag: board of directors

What is a Board of Directors?

Posted on by Oscar Jofre

Recently, we received a question from an issuer, asking to explain what a board of directors is. We believe that education is an essential part of the capital raising process, so don’t hesitate to reach out to our team with any questions that could help you along your capital raising journey.

 

Without further ado, this article will explore the role of a board of directors and the critical role they play within a company. The board of directors serves as the “operating mind” of the company – providing oversight to shareholders, officers, and employees alike. More importantly, boards can be utilized as a tool to mitigate risk when raising capital. This is because a board of directors typically has experience addressing issues that include:

 

  • Strategic direction
  • Corporate governance
  • Independence and accountability

 

What is a Board of Directors?

 

A board of directors, or ‘board’ is the highest governing body of a company. It is responsible for oversight and providing direction to the organization. The board consists of members who are elected by shareholders, normally on an annual basis. These members act as representatives of shareholders and their interests, ensuring that the company is managed properly. Public companies are required to have a board of directors, and while the same is not true for private companies, many still choose to do so.

 

The Need for a Board of Directors

 

The board of directors plays a vital role in ensuring the company is run correctly and its goals are met. The board works to ensure that any decisions made by the company are in line with shareholders’ interests, such as profitability and value preservation. A board also protects shareholders from potential risks associated with investing, such as fraud or mismanagement. In addition, having a board of directors can help to ensure that the company is making responsible decisions and staying compliant with legal and regulatory requirements. The board also helps to prevent self-dealing by executive officers or other members of management, as well as helping to set policy for the organization. 

 

One of the main benefits of having a board of directors is its ability to provide risk mitigation when raising capital. The presence of an independent board can demonstrate to investors that the company has taken steps to protect their interests and show potential investors that there is a competent and experienced group looking after their investments. It is important to distinguish between a board of directors and the other roles within a company. Officers are usually C-level executives who report directly to the board when making decisions regarding how the company operates. 

 

Early-Stage Companies and the Single-Person Corporation

 

For start-ups or early-stage companies, it is common for one person to wear multiple hats. In these instances, an entrepreneur likely serves as both an officer and a board member, making decisions from both perspectives. However, this differs from larger corporations who usually have more members on their boards, to ensure that the company is managed properly. As the company grows, so does the importance of electing an independent board.

 

Tools to Mitigate Risk When Raising Capital

 

When it comes to raising capital, boards must have access to certain tools to manage risk. This includes a minute book, cap table, and other documents which provide information about how the company is operating. By having access to this information, boards can minimize the risk of investors losing their money. With the advent of digital technologies that streamline this data management, board directors can have real-time access to company data that allows them to make informed decisions.

 

From start-ups to larger corporations, boards of directors play an important role in managing risk and providing oversight. Ultimately, having a board of directors is an important aspect of the capital raising process that can provide investors additional confidence in an investment after completing their due diligence.

What is a RegA+ Annual Shareholder Meeting?

Posted on by Oscar Jofre

With Regulation A+ allowing companies to raise up to $75M USD, the regulation enables many great investors to support an issuer’s journey. From the everyday person to accredited investors, people can claim their stake in companies they foresee to be long-term successes. However, with shareholders come significant responsibilities issuers must uphold to maintain compliance with securities regulations. One such requirement is holding an AGM.

 

An Annual General Meeting, or simply AGM, is a meeting of shareholders that companies are required to hold once per year. The purpose is to provide shareholders with an update on the company and what plans lie ahead. During these meetings, the company’s directors will present annual reports to shareholders that are indicative of its performance. AGMs are a critical component of upholding the rights of shareholders, ensuring that they are provided all necessary information to make the right decisions regarding their investments. Typically, these meetings should be held after the end of the company’s fiscal year, giving shareholders adequate notice to attend or attend by proxy.

 

A company’s articles of incorporation and bylaws will outline the rules for an AGM, however, they typically include a review of the minutes from the previous AGM, financial statements, approval of the board of directors’ previous year actions, and election of directors. AGMs held by private companies do not require any regulatory filings but require them to check or change their bylaws to ensure that the meeting can be held online and information can be distributed digitally.

 

Before any AGM, shareholders will receive a proxy statement, which outlines the topics to be discussed at the meeting. The statement will include information on voting procedures for shareholders with voting rights, board candidates, executive compensation, and other matters that are important to a shareholder. The company will typically send shareholders a package containing this information by mail or over the internet if that is their preference. For shareholders that have invested directly in the company and their name is in the company’s official records, they are entitled to attend the meeting in person. For shareholders that have purchased shares through a broker-dealer or investment bank, they can request information on how to attend the meeting and cast their votes. Shareholders with the option to eVote can satisfy SEC requirements. Since 2007, “notice to access” rules enable companies to send a one-page notice to inform shareholders that materials are available online rather than being mailed a full copy of all reports.

 

AGMs are essential for the success of any private company, ensuring that shareholders are well-informed about company decisions and can exercise their voting rights. KoreConX offers our clients an all-in-one AGM planner as part of the REgA+ end-to-end solution. Our solution helps our clients maintain full compliance with securities laws, manage AGMs end-to-end, distribute circular materials, allow shareholders to securely vote online, and enable everyone to participate. We recognize that your shareholders are an important part of your company and strive to simplify the process of managing your relationships with them.

 

Annual shareholder meetings for RegA+ offerings are an essential part of compliance. Issuers are required to hold this meeting annually, empowering their shareholders to be active participants. Contact KoreConX to learn more about our AGM planning solution.

 

What is the role of a board director?

Posted on by Oscar Jofre

When thinking about corporate governance, the first roles that often come to mind are the executive officers like the CEO or CCO. These roles are often responsible for the day-to-day operations of the company, keeping things running smoothly, with other roles reporting to them. However, the board of directors is just as important as they look out for the interests of shareholders. 

The role of a board of directors is to provide company oversight, ensuring that the company is operating in the best interests of shareholders. Decisions that the board of directors is responsible for include hiring or firing company executives, creating policies for dividends and options, and determining executive compensation. The board also generally ensures that the company has the right resources in place to operate effectively. The board of directors is governed by company bylaws, which include the process for selecting directors and what their duties entail.

The board is made of elected members called board directors. The shareholders must elect directors as voting rights are generally included as part of their rights as a shareholder. Shareholders are allowed to vote on board directors during annual shareholder meetings. Generally, board director terms are staggered so that only a few are elected each year, rather than needing to elect an entirely new board whenever elections are required.

Board directors are responsible for upholding the foundational rules outlined in company bylaws. Failure to do so can result in their removal from the board. Actions that may necessitate a director’s removal may include using inside information for personal gain, making deals that are a conflict of interest to shareholders, using their powers as a director for things other than the financial benefit of the company, and other actions that would be detrimental to shareholders.

There are typically three types of directors; inside, outside, and independent directors. Inside directors are typical representatives of company management and shareholders and may include company executives or major shareholders. Outside directors are not involved in the company’s day-to-day decisions, making them more objective and help strike a balance between inside directors but are generally compensated for attending board meetings and carrying out their duties. Independent directors are required to not have any ties to the company; for example, a relative of a company executive would be ineligible for this role.

It is important to ensure that board directors diligently follow the bylaws that govern them to ensure they always are acting in the best interests of the company’s shareholders. The board serves as a check and balance with the company’s management. Shareholders should also take their right to vote seriously, executing whenever possible to ensure that they are protecting their investment in the company. 

 

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