Critical considerations before setting up a Board of Directors for your business

A great board of directors can make a significant difference in the success of your business. Whether it is a requirement by regulators, a condition set by potential investors, or a strategic decision to seek expert guidance, setting up a board requires careful thought. Before proceeding, it is essential to consider several critical factors that will contribute to the effectiveness and value of your board.


Reasons for Establishing a Board: there are several reasons why setting up a board of directors might be necessary. Publicly held companies are typically required by regulators to have a board. If you are seeking funding from venture capitalists or financial institutions, they may require an independent board to provide regulatory oversight. Additionally, recognising the benefits of expert guidance, you may choose to establish a top-notch board to steer your company in the right direction.

Critical Considerations:

  1. Consider experts to fill knowledge gaps: When assembling your board, it is crucial to identify areas where your business needs expertise. Whether it is mergers and acquisitions, international expansion, or aligning with related industries, seek out executives with extensive experience and success in these domains. Their insights and guidance will prove invaluable in making informed decisions and driving your business forward.
  2. Prioritise those with board experience: When composing your board of directors, give strong consideration to individuals with prior board experience. These individuals already possess the knowledge and understanding of what it takes to be effective board members. They are familiar with board dynamics, governance practices, and the responsibilities that come with the role. Their experience will enable them to contribute immediately and provide valuable insights into strategic decision-making.
  3. Keep your board of directors manageable: Starting with a manageable number of directors is advisable. A board size of five is often considered optimal. It is also recommended to have an odd number of directors to avoid deadlocks during critical decision-making. As your business grows and evolves, you can reassess the board’s composition and consider expanding it if necessary to meet the changing needs of your organisation.
  4. Get people who can commit to their role: Choose individuals who can dedicate sufficient time and effort to fulfil their responsibilities as board members. Board service requires active participation, attendance at important meetings, and a willingness to address emerging issues. Ensure that the selected individuals are committed to the success of your business and are available to contribute their expertise and insights when needed.
  5. Form committees: Establishing committees within the board can enhance its effectiveness. Key committees can be created to focus on critical areas such as regulatory compliance, finance, and audit. Each committee should be headed by a chairperson with the relevant experience and skill set. This committee structure allows for the efficient delegation of responsibilities, ensuring thorough oversight and expertise in key functional areas.
  6. Prioritise independence and mutual respect: Strive for board members who can bring independent thinking and objectivity to their roles. It is important to select individuals who can separate personal relationships or connections from their responsibility of protecting the company’s interests. Even as the CEO or founder, none of the board members should be beholden to you. This ensures unbiased decision-making and the best interests of the company as the primary focus.

Setting up a board of directors is a critical step for any business. By considering factors such as expertise, experience, board size, commitment, committee structure, and independence, you can assemble an effective board that provides valuable guidance and oversight. With a well-composed board, your business can thrive and exceed its goals.


If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.

This information does not take into account the objectives, financial situation or needs of any person. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation or needs.

(Feedsy Exclusive)


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