Serving on a corporation’s Board of Directors can be rewarding to both the company and the individual serving.  It often provides an opportunity for the individual Director to provide wisdom, knowledge and valuable experience to the company in which it serves.  Serving on a corporation’s Board also brings responsibilities and duties.

Authority of a Board of Director

In North Carolina, typically, the Board of Directors serves the corporation after being elected by the shareholders.  Normally, the Board of Directors set corporate polices and oversee the policies being implemented by the corporate officers.  The corporate officers are appointed by the Board of Directors.  It is often said that the Board of Directors are to set policies and allow the corporate officers to manage the company.

The North Carolina General Statutes sets out specifically that the Board shall act on the following issues:

1.  Adoption, amendment or repealing of the bylaws with some limitations;
2. Defining the characteristics of the type of shares authorized to be issued by the corporation;
3. Authorize the issuance of share;
4. Declare dividends;
5. Authorize distributions to shareholders;
6. Provide for and call special shareholder meetings;
7. Appoint officers;  and
8. Authorizing the voluntary dissolution of the company

The Bylaws of a corporation may limit or expand the authority of the Board of Directors.  Thus, it is important to review the bylaws of a corporation to have a better understanding of the Board of Directors authority and duties.

Duties and Responsibilities of the Board of Directors

The Board of Directors needs the clear authority to set policy and carry out their duties and other responsibilities.  This is needed to properly provide for the operation of the company.  With responsibility also comes potential liability for wrongful activity.  As shareholders, you want to create an environment where both the Board of Directors and Officers sense a level of stability and predictability in order to operate and manage the business for effectiveness and efficiency.

The North Carolina General Statutes provides the following standards for the Board of Directors to discharge their duties:

1. In good faith;
2. With the care an ordinary prudent person in a like position would exercise under similar circumstances; and
3. In a manner the Director reasonably believes to be in the best interests of the corporation

We will review these standards as well as other issues regarding the Board of Directors in future blog articles.  If you have any questions, please feel free to contact us.