What fiduciary responsibilities do board members have? A client is starting a C corporation with an Advisory Board and some potential board members have questions about their respective fiduciary responsibilities, if any. Some board members will be investors, but not officers of the company.
Thanks in advance for your comments.
Rick
Board of Director seat and fiduciary responsibilities
Answers
Rick, are the Advisory Board members voting members?
1
The seats are non-voting members.
Rick
Rick:
Is your question about the fiduciary duties of members of an Advisory Board, or about the fiduciary duties of members of a Board of Directors?
Bob
3
Initially I intended to ask about the fiduciary responsibilities of Board of Directors members. My question confused the situation with the use of Advisory. That said, we are undecided on whether to create a BOD or BOA and I would like to understand the fiduciary responsibilities of each. I am leaning towards a BOA. If we go the route of BOE, I need to understand the responsibilites of voting and non-voting seats.
Rick
Rick:
Good article here on the topic: http://goliath.ecnext.com/coms2/gi_0199-4230522/How-liable-are-advisory-boards.html
If advisory board members only recommend, then fiduciary responsibility is minimal to non-existent. Craft a good advisory board agreement.
Members of the board of directors however, have fiduciary responsibilities de facto.
The only exception might be a non-voting member of the BOD (sometimes called an "observer seat"). They can contribute to discussion, but not vote on matters. Not sure about fiduciary responsibilities for this category. A question for your attorney.
Ken
Generally, if the BOA is acting as a board of directors, there is a high degree of
Bob
As a C corp you will need a BOD. The incorporation documents normally spell out the number, meetings etc. The BOA is merely voluntary and has no authority to govern. I have never seen a C Corp with just a BOA. The risk would be in such a case that they are the defacto board. I would be talking to outside counsel about this.
It's vital to take out a fiduciary insurance policy, that will cover these participants on the BOD. The cost isn't exhorbitant, and could save some costly headaches down the road.
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