Shareholders and the board of directors are two crucial elements in any company structure. Despite having different roles, both virtual data rooms share the same goal of ensuring the company’s success and sustainable in the long run. Understanding the various roles and how they interact is key to good corporate governance.
The board of directors is an organization of people that are elected by shareholders to supervise the company. They typically meet on a regular basis to create policies regarding overall oversight and management. In addition they handle the short-term decisions like hiring or firing employees, entering into an agreement with a service provider or a strategic partner, and many more. The primary responsibility of the board is to safeguard shareholders’ investment by ensuring the business runs smoothly and efficiently.
While there isn’t any lawful requirement that directors are shareholders (indeed the initial directors may be listed on the Certificate of Incorporation or Articles of Agreement or selected by the incorporator), the directors must have a significant stake in the company. They may be individuals or corporations. The board could be composed of any number of individuals however most believe that nine members is the ideal number. The power of the board stems from its bylaws, as well as the voting rights associated with shares.
In a company that is publicly traded, it’s easy for anyone to become a shareholder by the purchase of stock. However in private firms where there is a shareholder agreement or bylaws the shareholders have more control over who is eligible to be a shareholder.