What are board minutes? Board minutes are an extremely important part of operating a business. Especially for those desiring to build a large, fast-growing company, with as few legal issues and distractions as possible.
This is not one of the most common topics covered and sought out by entrepreneurs looking to launch and begin running a startup. Yet, it is a factor that can be incredibly impactful as you really start growing, are out fundraising, and are building a professional organization.
Neglecting them, being sloppy, and failing to keep good records can really become an Achilles heel later on. So, getting in a good habit of managing this well will only help remove hurdles and drag on your venture.
So, what are board minutes? Who takes care of them? What other factors should founders be considering when managing their boards?
The Ultimate Guide To Pitch Decks
Board Minutes 101
Board minutes are an official and legal record of what occurs during board meetings. Especially, covering key decisions made, and items voted on.
This is a written record that will be saved for future reference and provided to others as needed.
Every meeting of the board of directors should have written notes in the form of minutes. How frequent your meetings will be, and minute requirements may depend on the laws governing your specific type of corporate structure and entity.
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Board Of Advisors Vs. Board Of Directors
We are talking about board minutes in relation to meetings of your board of directors.
As a startup entrepreneur, you may have both an unofficial or more casual board of advisors, as well as an official board of directors.
Advisors are crucial for all business owners and operators. These can come in many forms. From mentors to peers in mastermind groups, and paid consultants. As well as advisors for specific needs, including fundraising and M&A.
Your board of directors has official titles. Typically Chair of the Board, Treasurer, Secretary, and Vice Chair.
Even as you’re learning more about the various titles, you’ll need to know more about the roles they play, their responsibilities, and what to expect from the board members. Check out this video I have created explaining each chair in detail.
How To Build Your Board
Your board may start out by being your co-founders. As you raise capital, you can expect your investors to also place their own representatives on your board. Which gives them significant control over your company, and their investment.
Your board is critical to and absolutely pivotal to the success and failure of your venture. As well as its level of performance, and the ultimate outcome.
With this in mind, there are several factors to keep in mind when assembling and organizing board members.
This includes the credibility they will give your company. Their reputation will directly reflect on your business. Then there is the tangible value they will bring to your venture. This may be their contacts, as well as their business acumen. As with your co-founders and executive management, you want them to cover various parts of the business. Without too much overlapping.
Then you will also need to have board members whom you can work well with. Otherwise, every step and decision is going to be incredibly painful. Having a good relationship with them in advance will go a long way to avoiding major issues.
How To Manage Your Board
Effectively managing your board is going to make all the difference in how this venture goes.
It will impact your product, profitability, salary, the treatment of your team and customers, your fundraising, and any potential exit, as well as how well that turns out.
On one hand, you serve at the will of your board of directors. Depending on how your shares, classes of shares, corporate documents, and cap table is structured, they could well have the power to not only determine your compensation but whether you continue to be able to work in your own company.
On the other hand, some entrepreneurs will tell you that their perspective is that their board is there to serve them. Much of this comes down to how you manage and interact with them.
Be very conscientious with their time, be organized, be transparent, and maintain trust.
How To Write Board Meeting Minutes
At every meeting, there needs to be board meeting minutes.
Understand what are board minutes and make sure they have the following traits:
- Brief, but intelligible
- Formal in style and tone
- Written in the past tense
- Decisive (as the discussion allows)
The secretary of the board is the individual tasked with taking and writing the board minutes. Which will then later be approved by the Chair before recording.
Minutes should contain all essential information, though be concise enough to be usable and efficient to use later on.
Board Meeting Minutes Template
Here is an example of how you can create a template for your board minutes.
- Company name
- Name of meeting
- Location, date, and time of the meeting
- Names of those in attendance and absent
- Unfinished business from the previous meeting
- Approval of board minutes from the previous meeting
- New business items
- New data being reported
- Items to be voted on
- Conclusion of those decisions
- Action steps to be taken after the meeting, and who is taking responsibility
- Information about the next meeting
- Time this meeting is adjourned
Mistakes To Avoid With Board Minutes
Even as you understand what are board minutes, you should also know how to create them. Failing to document a quorum is a big issue. If a quorum is required to vote and make a decision on certain items, to be legal and stand, this must be documented.
Including unnecessary but sensitive information. More and more people will have access to this content. There are also many risks of leaks, hacks, and more. If it’s sensitive, but not needed in your minutes, remove it, with the appropriate approval.
Waiting too long to clean up and provide minutes just creates more potential problems. The memory of the exact events and words will become vaguer. There is more chance of losing the notes. There is the risk of just not getting them filed in time for something important.
Poor organization of records of minutes is a big problem too. They should be easily found as needed. This can be a serious legal issue. Especially if there are disputes, or resolutions for time-sensitive and major factors, like fundraising and M&A. Having backups online and in hard copy can be wise.
Keep in mind that in fundraising, storytelling is everything. In this regard, for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
The Risks Of Poor Minute Taking
While this may often seem like a small, tedious, and unimportant task in relation to everything else going on in your business, there are serious risks of failing to keep minutes.
Piercing the corporate veil is always a risk that needs to be carefully avoided. This is when a judgment or lawsuit is levied against the company, but also flows through to the individuals, and their personal finances.
If you have not kept great corporate records, and have kept your business and personal finances separate, then creditors could come after your home, vehicles, other assets, bank accounts, and future income from other sources. Do not let that happen.
The other most obvious risk is that there is a dispute about a decision and action that has been taken. The minutes, as well as any other supporting corporate documentation, are the evidence to provide clarity and back up opposing opinions.
Avoid Conflicts And Legal Issues
It’s in black and white and has been reviewed, approved, and recorded. This should first help avoid any attempts to dispute anything, and then provide clarity on the issue.
If you don’t have this documentation all types of internal fights and legal battles can arise. Often around the biggest and most important events, and at the worst time. This can include agreements to take on debt financing, the terms and clauses of funding agreements, and selling the business.
Fraud is another reason that minutes become extremely important. This is proof that the board was not involved, and did not approve any fraudulent moves that could lead to huge legal settlements, deep, long, and disruptive investigations, and very costly bad PR.
In fact, not keeping minutes can alone be a big red flag that draws this uncomfortable type of scrutiny. Which could otherwise be quickly cut short. So, take the time to understand what are board minutes and how to craft them.
When Is The Right Time For A Founder To Step Back And Become A Board Member Only?
This is not a transition that many new startup entrepreneurs initially plan for or expect. They often either think that they will continue running this highly successful business into infinity, or will sell the company quickly for a huge financial windfall.
However, it is actually not that uncommon for founders to eventually step back, and restrict their engagement to being a board member, rather than a part of the executive management. This is often to the position of Chair of the Board, though does not have to be.
In fact, if you are successful, you may end up joining the boards of several other organizations in addition to your own startup.
More and more frequently, we are seeing startup founders take the advice to recruit and bring in more executive management early. Even an outside CEO.
Advantages Of A Timely Exit
There are many advantages to this, even when it is not immediately necessary. For a start, it can take an enormous amount off of your plate. Including hiring and building out the various departments in your business. It also means bringing in veteran expertise, where you may lack it.
That is a way to hack decades of experience and knowledge, without having to go through all the time and expensive trial and error. This can be vital as a technical founder with little practical business experience. Which can also give investors a lot more confidence when it comes to fundraising for your business.
Then there is the time when the business may outgrow you. There is a lot you can do to learn and try to stay ahead of it. Including bringing in other strong board members. Though, sooner or later, it just may not be as efficient and effective as it could be. The last thing you want is to be the roadblock or ball and chain holding the mission back, and preventing the best performance.
You may also simply not enjoy it at some point. Your company will morph as it grows. As it matures or even goes public, it can lack the speed and excitement that really hooked you to entrepreneurship in the beginning.
Or you may have another project you want to jump into, or just need to avoid burnout. It is perfectly acceptable, if not better in many cases, to pass on the baton and stay on the board while letting others handle the day-to-day.
Let’s reiterate what are board minutes. Board minutes are official records of what happens during meetings of your board of directors. They are essential for each meeting. Organizing and making them well can save you and your company from all types of issues later on.
It will help avoid miscommunication, disputes, and lawsuits. While making it easier to move forward with your mission.
This may not be the most exciting part of a startup, but it is core to everything. Know what they should look like, and appoint the right person to handle this for you.
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