Understanding your duties is the first step. Meeting them requires good governance practices that become part of how you operate.
Good governance practices
Good governance does not have to be complicated. The formality required depends on the size and complexity of your business. A two-person company needs different processes than a large enterprise.
Regular board meetings
Meet regularly to review performance, discuss strategy, and make decisions. How often depends on the size & complexity of your business, but at least quarterly is typical. Document what was discussed and decided.
Financial oversight
Review financial reports regularly. Understand your company's cash position, profitability, and financial health. Ask questions if you do not understand something.
Clear decision-making
Know which decisions the board makes and which are delegated to management. Have clear authority levels for expenditure and commitments. Remember that transactions you are personally financially interested in, or which are equal to or exceed half the value of your company's gross assets, require shareholder approval.
Risk awareness
Identify and manage key risks to the business. This does not mean avoiding all risk, but understanding what you are exposed to and deciding if it is appropriate, and how it can be mitigated.
Record keeping
Good records protect you. If your decisions are ever questioned, being able to show what you considered and why you decided as you did.
- Keep minutes of board meetings
- Document significant decisions and the reasons for them
- Maintain proper company registers
- Keep financial records current
- Retain relevant correspondence and reports
When to seek advice
Directors are not expected to know everything. Seeking appropriate advice when you need it is part of acting with care and diligence.
Consider seeking advice when:
- Facing a decision outside your expertise
- The company is in financial difficulty
- There is a potential conflict of interest
- A major transaction is proposed
- Shareholders are in dispute
- You are unsure about your duties in a situation
You can rely on advice from professionals, but you cannot blindly delegate your responsibility. You need to actually consider the advice and form your own view.
What we do at this stage
We help you establish appropriate governance practices for your company. We can review your current processes, suggest improvements, and provide advice when you face decisions that engage your director duties.