đź‘Ť
Open Core Ventures Handbook/đź‘ŤBoard of Directors and Board Approval

Board of Directors and Board Approval

Board of Directors

A Board of Directors (”Board” or “BoD”) is the governing body of a company. Board members have fiduciary duty (the highest standard of care) on behalf of the organization, its shareholders, and other stakeholders (especially in the context of a Public Benefit Company (see OCV Public Benefit Company).
The Board’s role is to provide strategic governance and oversight, serving the organization’s stakeholders. Core activities include approving annual budgets, measuring goals and achievements, hiring and managing the executive team (including their compensation).

Items Requiring Board Approval

CEOs (and other C-suite employees) of OCV companies should be aware that the following actions require approval from the company’s Board:
  • Any amendments to corporate bylaws or the company’s certificate of incorporation
  • Grants or transfers of any company equity in the form of stocks, options, or warrants to any person or organization
  • Any sale or distribution of the assets of the company
  • Latest 409A valuations prior to issuing stock options
  • Any distributions to shareholders
  • Any borrowing or lending
  • Annual budget approval
  • Senior management changes in employment status or amendments to their employment contract (including for the CEO themselves)
    • OCV will provide approval on any employment contract representing $150,000 or more per year
  • Changes to the company’s employee benefit plans
  • Any restructuring of the company including dissolution
  • Any agreements materially important to the company (partnerships, contracts)
    • Partnerships and contracts above $50k are considered material

Board Composition

Initially, OCV’s COO will serve as the sole director for the company. Key decisions for Board actions will be made through internal discussions at OCV. Board composition will change over time with each new round of financing.

Fiduciary Duty

Board members (and corporate officers) are fiduciaries, who are legally required to put their principal (such as shareholder / stakeholders) or beneficiary’s interests above their own. The Board and corporate officers have 3 primary legal duties:

Duty of Care

Fiduciaries have the obligation to provide a level of care that an ordinarily prudent person would exercise in a similar situation. To exercise a duty of care, fiduciaries should make informed decisions, seek advice when appropriate, consider the consequences of their actions, and actively stay informed on company affairs.

Duty of Loyalty

Fiduciaries must act in the best interest of the company and its shareholders rather than self-interest. Fiduciaries may never use information obtained through their position or leverage corporate advantages for personal gain, should avoid conflicts of interest, and should only utilize company resources in good faith towards the best interests of shareholders.

Duty of Obedience

Fiduciaries must not act inconsistently with and should ensure their actions are aligned with the company’s mission.