The Harvard law blog on corporate governance usually includes posts on such lofty topics as activist shareholders, corporate takeovers, the latest SEC regulations for public companies and Delaware law updates. This week, there was a refreshing post on family-owned businesses and the question of whether they ought to implement boards (of directors for corporations, of managers for LLCs). Some of what they post assumes businesses that are large and complex, even if not publicly held. But much is relevant for small businesses as well. For example, we think the following excerpt is on point:
Having a board does require certain formalities—like preparing meeting agendas and materials, and recording minutes. And yes, these activities take time. Hopefully, your board is effective at bringing value so this time investment pays off.
In some situations these formalities can prove valuable. For example, if at a future point in time some family members allege that the company is not being run properly, having copies of meeting materials and minutes can help demonstrate that there was appropriate board oversight.
We believe even the smallest of businesses can benefit from following some board formalities, even if the Board consists only of representatives of the two main owners of the company. Check out the full article for further discussion on the question of boards of directors for private companies.