The board of directors has tremendous significance to a startup company. While the company’s management team is responsible for day-to-day business operations, the board of directors is ultimately responsible for making the most critical decisions that face the company, and must also approve any and all issuances of the company’s equity securities, including securities convertible into equity such as options and warrants. In addition, should a company wish to adopt an equity incentive plan to incentivize its employees or others, the board of directors must approve the plan and determine the fair market value of the company’s shares of common stock underlying any stock option awards.
Under Delaware law, a company’s initial board of directors is formed upon the filing of the company’s certificate of incorporation, if the board members are named in the certificate of incorporation. More often, the board is appointed by the incorporator of the company simultaneously with or immediately after the filing of the certificate of incorporation. The board serves at the pleasure of the stockholders, who can remove and elect individual members by majority vote (unless otherwise specified in the company’s governing documents or in agreements among the stockholders).
Click to read the full article: What Startup Founders Should Consider When Choosing a Board of Directors