A strong business can be made even more so if you have a diverse, skilled, and supportive board of directors behind it.
We asked around our community and its experts, to see what advice they’d share on how to get the best composition for your board and really enrich your business. We’ve set out what we learned from them in this guide.
1. Decide how many directors you want
Each private limited company must have at least 1 director (and a public limited company must have at least 2 directors).
After that, how many directors you add is really up to you.
In reaching this decision, you’ll ideally want to consider what you (and any other fellow directors) need, what the business needs (e.g. is there an expertise or skills gap that you’d like to plug?) and who are the candidates that you might want to invite onboard.
Decisions from a well-balanced board, in number and skills-set, tend to inspire confidence in a business, and more easily evidence that decisions are more considered and well-informed.
So, while when you start out, you might be the only director, as you start to get underway, and especially as you grow, seek funding and start selling, it may be sensible to have a few more than the minimum.
But don’t rush to fill numbers if there really isn’t anyone yet with whom you’d want to sit around the table and solve problems. It’s not a game of numbers. Business strength comes from having the right people around the table, (or simply in your close network, in other key employee roles and/or perhaps not at the table itself at all). It is not achieved by a magic number of board seats being filled.
And always ask yourself whether a prospective director shares your work ethic, enthusiasm for the business and is likely to contribute the same level of value as you and any other directors do.
If you’re underway and generating some nice revenues, some commentators take the view that 7 directors or fewer strikes a nice balance between too many or too few. But at the end of the day, it’s about what works for the business. Fewer may be absolutely fine, more might be genuinely necessary.
2. Cover the right bases
While you can likely bring a lot to the table in your business, it can be hugely advantageous to appoint directors that have expertise in areas you don't. Try to have directors specialised in different part of business management, e.g. finance, HR, marketing, technology, sales, etc.
It's also best to have a board that's balanced and diverse in personality too, there’s plenty of research to show that this increases productivity and helps create a strong and considerate employee culture too.
3. Check they’re eligible
Conditions around age
Directors must be at least 16 years old. (For public limited companies, appointments of candidates over 70 years old must be approved by the shareholders too.)
Previously disqualified or legally ineligible directors
Disqualified directors cannot be appointed as a director of another company during the period of their disqualification, without the permission of a court.
Directors may be disqualified for a variety of reasons almost always related to previous unlawful or reckless conduct while they were a director of an earlier company. Reasons for disqualification include allowing a company to continue to trade when it hasn’t the money to pay its debts, not keeping proper accounting records, not paying tax and embezzlement of company money.
Disqualification can last up to 15 years, during which time, the disqualified individual cannot be a director of a UK registered company or otherwise be involved in forming, marketing or running a company. Breaking the disqualification status can bring fines and potentially even a prison sentence of up to 2 years.
An individual also can’t be a company director if they’ve been declared bankrupt and have certain restrictions placed on them or they’re under a debt relief order (essentially a court order assisting you in paying off debts of less than £20,000).
The seriousness of this should not be overlooked. Because if you appoint someone disqualified without the permission of the court, you could be prosecuted and become personally liable for your company’s debts, if you act on instructions given to you by a disqualified director.
Even if you were to gain the permission of a court, the fact that you want to appoint someone who is currently disqualified will inevitably invite unwelcome speculation and doubt about the wisdom of your choice of candidate, and potentially the wisdom of other decisions you’re making. There are always going to be exceptions, but those cases are just that: very rare.
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