Why does a successful firm need a board of directors?
I believe there are several reasons why business leaders should think about creating a board of directors, even if they are not required to do so, based on my own experience as the founder of Advanced Care Partners (ACP).
1.Expertise in Strategy: After I sold the majority of my shares in ACP, we concentrated first on building a solid board with a track record of scaling larger and better businesses. It’s crucial to pick the best talent for your board. Identifying your needs is the first step in accomplishing this. We at ACP were looking for seasoned executives who had developed business plans and grown organizations to make over $200 million in sales. The board’s contribution to positioning our business for success from a strategic perspective impressed me. Our expansion was aided by the board members’ combined experience.
2. A Diverse Set of Skills: In addition to helping with strategic planning, a diverse board of directors gives you access to a variety of professionals who have “skin in the game” without having to shell out for expensive consulting fees or full-time staff. The board at ACP assisted us in completing any knowledge and experience gaps. To get the most out of your board, though, choose complimentary and varied directors who provide a range of skills, viewpoints, and life experiences.
3. Credibility and Relationships: Board members often have extensive commercial experience and act in the company’s best interests. Their importance is crucial in raising the trustworthiness of your business. Additionally, they can assist you establish connections and productive alliances, open doors, and more.
4. Industry Knowledge: Because ACP operates in the healthcare sector, the board is also charged with providing next-level compliance supervision. The ability to comprehend a particular industry’s potential and hazards is perhaps the most valuable contribution a board of directors can make because it aids the management team of the company.
5. Someone to Lean On: The ideal person to turn to when faced with a challenging decision is your board of directors. It’s crucial to establish a positive working connection with your board, especially with the board chair. Building trust requires time, and frequent, open communication is the first step. We frequently work alone as corporate executives. being aware that you have a team of seasoned executives managing the business.
How can you establish a successful board of directors for your company?
A number of variables should be taken into account while creating your company’s board of directors. The following advice will assist you in creating a successful board:
1.Take your financial situation into account Make sure that the creation of a board is feasible for your business financially before moving forward. Be aware that board pay in privately owned businesses varies depending on the company’s size and time commitment and is often a combination of cash and equity.
2.Establish the board’s dimensions There is no one-size-fits-all board. As a result, while choosing the right number of board members to balance value with time management and resources, take your company’s size into account and be global. According to past experience, smaller businesses with annual revenues of up to $75 million can create a board of five to eight members that functions effectively. In relation to the size of the company, this range provides just enough room for a variety of viewpoints. A place at the table should be left open if your ultimate goal is to sell the business, even partially.
3.Select participants who will oppose your presumptions.
Making choices that were in the best interests of the business required the board members of ACP to be impartial. It can be challenging to allow for independence of thought when a significant percentage of the board is intimately connected to the company’s CEO. Instead of picking board members based on how well they know you, try to choose them based on their area of expertise. This promotes professionalism within your organization and guarantees that you, as a business leader, will get wise counsel.
Company must have a board of directors, according to Section 149.
(1) Every corporation must have a board of directors made up of individual directors and include the following:
(a) A public company must have a minimum of three directors, a private business must have two directors, and a one-person firm must have one director.
(b) A public company may have a maximum of fifteen directors:
With the proviso that upon the adoption of a special resolution, a business may select more than fifteen directors:
Additionally, the class or classes of businesses that may be prescribed must have at least one female director.
(2) Within one year of the date this Act is enacted, any firm that existed on or before that date must comply with the requirements of subsection (1)
(3) Every company must have at least one director who spends a minimum of one hundred eighty-two days in India throughout the fiscal year; however, this requirement will only apply proportionately to newly incorporated companies at the conclusion of the fiscal year in which they are incorporated.
(4) The Central Government may regulate the minimum number of independent directors in case of any listed public firm, but at least one-third of the total number of directors must be independent.
(5) Every corporation that existed on or before the effective date of this Act should, within one year after such commencement or, as the case may be, after the date of notification of the rules in this respect, comply with the provisions of subsection (4).
(6) In relation to a company, an independent director is a director who is not the managing director, a whole-time director, or a nominee director; (a) who, in the Board’s opinion, is a person of integrity and has the necessary knowledge and skills; (b) who is or was not a promoter of the company or its holding, subsidiary, or associate company; and (ii) who is not related to promoters or directors in the company, its holding, subsidiary, or associate
(7) Every independent director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his status as an independent director, give a declaration that he meets the criteria of independence as provided in sub-section (6).
Explanation. —For the purposes of this section, “nominee director” means a director nominated by any financial institution in pursuance of the provisions of any law for the time being in force, or of any agreement, or appointed by any Government, or any other person to represent its interests.
(8) The company and independent directors shall abide by the provisions specified in Schedule IV.
(9) Despite anything to the contrary in any other provision of this Act, but subject to the rules of sections 197 and 198, an independent director is not eligible for any stock options and is only eligible for the fee specified in sub-section (5) of section 197, reimbursement of travel expenses incurred to attend meetings of the Board and other meetings, and any profit-related commission that may be authorized by the members.
case: In Re City Equitable Fire Insurance Co.
What updates to the Companies Act of 2013 did the 2021 budget include?
- Modifications made to the definition of “Small Companies” where the definition was changed. A small firm is one whose paid-up capital does not exceed INR 2 crores, according to the new revision in the definition. Additionally, it specifies that the turnover cannot be greater than 20 crores. This was originally set at 50 lakhs and 2 crores, respectively.
- The One Person Company (OPC) framework underwent revisions. A new modification says that an NR can now establish an OPC, which was previously not permitted. Private limited businesses will now be able to register in India. The abolition of the dollar cap when converting to other company formations was the other objective. where businesses with paid capital under 50 lakhs and a 5-crore revenue threshold were previously permitted. Finally, the residence period was shortened from 182 to 120 days.
The Companies Act,2013
Law students often face problems, which they cannot share with their friends and families. We have started a column on our website Student’s Corner. In this column we are talking to several law students about the challenges that they face. Students who are interested in participating in the same, can fill this Google Form.
IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.
We do conduct several Courses, Quizs and Webinars, Click here to register
The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.
If you would also like to contribute to my website, then do share your articles or poems at email@example.com
Join our Whatsapp group for Legal Job Openings