A board of directors is the body elected or appointed members which looks upon the functioning of the government. A board of directors’ activities are determined by the powers, duties, and responsibilities delegated to it or conferred on it by an authority outside itself. These matters are typically detailed in the organization’s rules. These documents commonly also specify the number of members of the board, how they are to be chosen, and how often they are to meet. However, the constitution and bylaws rarely address a board’s powers when faced with a corporate turnaround, restructuring, or emergencies, where board members need to act as agents of change in addition to their traditional fiduciary responsibilities. The voting members chooses the members of the board. However, the board is classified into 2 groups:
- Stock Corporation
- Non-Stock corporation
In Stock corporation, the shareholders select the Chief Executive officer and who works as chief of the corporations. In Case of Non-stock corporations, there is no membership of general voting. The board is supreme in executing the functions of business organizations/companies. They are also called as Board of governors, board of trustees etc.
Functions of Company Board
A company board meeting held in once a quarter of the starting or end of the financial year. It varies from companies to companies. The main work of the executive board is look upon the problems which the company is facing and make out the solutions for the problems. The company board also looks upon the various matters of Mergers and acquisitions, Adding a product line etc. The company board also looks upon the debt and equity matters of the company. In a Financial year a company is sufficient to distribute the dividends to the shareholders of the company. Basically the duties of the company board is to look upon the annual budget of the company, selecting and appointing Chief executive officers, chairman or the managers of the company at senior level positions. The policy framework is the most essential part of the company board. The company board looks upon the ‘Basic Amenities’ of the company.
Process and structure of Company board
In India Institute of Company Secretaries of India (ICSI) looks upon the matters of the company in relation to the rules prescribed by the Government of India. Every business organization/Company must adhere to the rules stipulated By the ICSI. According to the studies board of directors does not consist of more than 7 members as it reduces the level of effectiveness in making decision in relation to the firm. In case of stock corporations, The corporations must have to adhere to the rules stipulated by Securities and Exchange Board of India (SEBI). The company Board mainly consists of The persons who has high quantity of shares in the company, The Chief Executive Officer, The company secretary, the legal advisor and other members coming from various senior positions. In most Common law countries, the powers of the board are vested in the board as a whole, and not in the individual directors. However, in instances, an individual director may still bind the company by his acts by virtue of his ostensible authority.
Approval of company board on Matters
The company board act as main functionary of the organizations which helps in smooth function of the business organizations/Corporations or Companies. There are some matters that can not be come into force without the approval of the company board. Some matters need prior approval of the board like :
- Amendments to the certificate of incorporation or bylaws;
- Equity grants or transfers (whether stock, options or warrants);
- Distributions to stockholders;
- Borrowing or lending money;
- Adopting an annual budget;
- Hiring or terminating members of senior management (or amending the terms of their employment);
- Adopting employee benefit plans (401(k), profit-sharing, health insurance, etc.);
- A sale or other distribution of all or substantially all of the assets of the company;
- A dissolution or winding up of the company; and
Entering into any agreements that could be of material importance to the company (intellectual property licenses, customer contracts, vendor contracts, consulting agreements, office leases, equipment leases, etc.).
Company board is the most essential part of the business organizations. Company boards act as main functionary of the company. The company board looks upon the various matters of the company. Its is for an organization to look upon on the cluster of problems arising in the business organizations. Thus, company board or board of directors discuss and decide on various serious matters of the company which helps in smooth functioning of the company.
Author: This blog is written by Mr. Aayush Goel, student of Delhi Metropolitan Education (GGSIPU), a passionate blogger & intern at Aapka Consultant.