Shareholders and the Board of Directors

Shareholders and the board of directors are two important elements in any company structure. Although they each have their own duties, they both share the same goal: ensuring the company is successful and sustainable over the long run. Understanding the various roles and how they interact is the key to good corporate governance.

The board of directors is a group of individuals who are chosen by shareholders to oversee a company. They typically meet regularly to create guidelines for the overall supervision and management of the business. They also make decisions on a short-term basis, such as hiring or firing employees, signing an agreement with a service provider and making strategic partnerships. The main function of the board is to safeguard the shareholders’ investment by ensuring that the company is running smoothly and efficiently.

There are no legal requirements that directors be shareholders (in fact, the initial directors are listed in the Certificate or Articles of Incorporation or be selected by the incorporator) They do need to have a substantial stake in the company. They can be either individuals or corporations. The board could have any number of members, however, many think that the maximum number of members is nine. is ideal. The board’s authority comes from its bylaws as well as the voting rights that come with shares.

In a company that’s publicly traded, it is easy for anyone to become a shareholder by the purchase of shares. In private companies, if there are shareholders’ agreements or bylaws, the shareholders have more control.

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