Written in collaboration with Investir&+, a long-term investment structure dedicated to entrepreneurs developing projects with strong social or environmental impact, to support them in their growth.
What is at stake?
A board has several roles:
- To representing the interests of the company
- To discuss company's strategy and key business decisions and to inform shareholders
- Certain decisions can be submitted to the vote of the board (to be defined in the Shareholders' Agreement)
Why is it important?
As early as the Pre-seed stage, thinking about the formation of the Board is of vital importance. Taking the time to assemble an initial committee of three to five people with diverse profiles, skills, and experiences is one of the best ways for a startup to avoid certain mistakes and therefore to progress more rapidly. Transparency and trust are the key factors.
Three actions to take
1️⃣ Anticipate the right time to constitute the Board
For SAS, the articles of association are very flexible: there must be at least one president, but the creation of a board of directors is not mandatory. From the moment the startup begins to raise funds, the creation of a board is usually included in the shareholders' agreement, so that one or more representatives of the shareholders can sit on it. However, an advisory board can be established before or without fundraising activities.
Be careful, formalizing a board too early can weigh down founders' actions with unnecessary administrative formalities. But forming it too late can deprive the startup of crucial strategic support for the rapid development of its project.
2️⃣ Ensure diversity in the board’s profile
- To choose the right profiles representing investors, there are important considerations:
- Human and relational qualities, trust, listening skills
- Competencies, expertise, networks
- Ensuring profile (in experience, specialties, gender, etc.) is an excellent way to enrich debate and bring new perspectives to problems encountered. Objectives can be set from the start to make diversity a central characteristic of the board and thus to make it "responsible by design."
- Ensure representation of all aspects of diversity: age, background, experience, geographical origins, skills...
- A board is not fixed! Adjustments can always be made later if necessary.
3️⃣ Appoint at least one independent member to the board
Choose one or two individuals who have no connections with the company and its founders but have expertise relevant to the startup's development. They will represent the specific interests of the startup (which may sometimes differ from those of shareholders or founders). These members can be observers (with no voting rights) or independent directors (with voting rights).
→ Ensure that the choice of any independent director is supported by both the founders and the investors.
📚 Further Reading
📖 Definition, Formation, and Operation of a Board (Investir&+)
📖 Formation of a Board: Feedback (Investir&+)
📖 The Galion - Guide to the Board
✍️ Contributors to this document
Investir&+ is a long-term investment structure dedicated to entrepreneurs developing projects with strong social or environmental impact, supporting them in their growth.
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