Your board must approve anything that changes who owns the company or commits it in a significant way: every issuance of stock, options or SAFEs, the equity plan, executive hiring and pay, significant debt, charter and bylaw changes, and any sale or dissolution. Day-to-day operations belong to the officers. Most startups approve board matters by unanimous written consent, signed before the action takes place and kept in the minute book.
Key takeaways
- Every equity issuance needs board approval first, including option grants, restricted stock and SAFEs.
- Officers run the business within the budget. The board approves the budget, executive compensation and decisions outside the ordinary course.
- A board written consent must be signed by every director. An email thread or a chat message isn’t a consent.
- One consent can approve a whole SAFE round, and the board can delegate some grant decisions to an officer within limits it sets.
- If something was issued without approval, Delaware has a formal process to ratify it. Fix it before your next financing.
What’s the difference between the board and the officers?
The board sets direction and approves major decisions. The officers, led by the CEO, run the company: hiring staff, building the product, signing ordinary customer and vendor contracts and spending within the budget. In a young startup the same two or three people often fill both roles, which is exactly why it matters to know which hat you’re wearing. A decision that needs board approval isn’t valid just because the CEO, who is also a director, signed it.
Not everything needs a board vote. Signing an NDA, hiring a non-executive employee, signing a standard customer contract and spending within the approved budget are all officer decisions. A useful test: if it changes who owns the company, commits the company outside its normal course of business, or would surprise a director to hear about later, take it to the board first.
What does the board need to approve?
| Action | Board | Stockholders |
| Issuing stock, options or SAFEs | Yes | No, unless the charter requires it or more authorized shares are needed |
| Adopting or increasing the equity plan | Yes | Yes |
| Hiring, firing and paying officers | Yes | No |
| Annual budget | Yes | No |
| Significant debt or loans | Yes | Only if preferred protective provisions apply |
| Contracts outside the ordinary course | Yes | No |
| Starting or settling significant litigation | Yes | No |
| Dividends or other distributions to stockholders | Yes | No, but Delaware law allows them only out of surplus or recent profits |
| Adopting benefit plans, such as a 401(k) or health plan | Yes | No |
| Amending the charter | Yes | Yes |
| Amending the bylaws | Usually yes | Stockholders can also amend |
| Merger, sale of the company or dissolution | Yes | Yes |
| A deal between the company and a director or officer | Yes, by disinterested directors, or by disinterested stockholders | See below |
After a priced round, the charter’s protective provisions usually add a separate preferred vote for some of these. See What Do Stockholders in My Startup Need to Approve? and What Are Protective Provisions?.
Why does every equity grant need board approval?
Under Delaware law, the board decides what the company receives for its stock, so stock can only be issued with board authority. For options, the board also sets the exercise price, which must be at least the fair market value of the common stock on the grant date. In practice, that means a current 409A valuation. A grant dated before the board approved it, or priced below fair market value, is a defective grant that can cause tax problems for the employee. See 409A Valuation and Employee Stock Option Plan.
The equity plan itself needs board and stockholder approval before the first grant under it. A cash-only advisor or contractor agreement doesn’t need board approval. An advisor agreement that comes with equity does.
Do we need a separate consent for every SAFE?
No. One board consent can approve a whole SAFE round: issuing SAFEs on the standard post-money form up to a stated total amount, at a stated valuation cap and discount. Investors can then sign as they come in. If the cap, discount or total changes, get a new consent. See SAFE.
Delaware also lets the board delegate the issuance of stock and options to an officer, within limits the board sets, such as a maximum number of shares, a time period and a minimum price. That can help a company making many small grants, but the officer can’t make grants to themselves, and most early-stage companies simply approve grants in batches at regular intervals.
How does a board approve things without a meeting?
Startups rarely hold formal votes on routine matters. Instead, they use a written consent. Under Delaware law, the board can act without a meeting only if every director consents in writing or by electronic transmission. Unlike a meeting, where a majority vote is enough, a written consent has to be unanimous. Electronic signatures through DocuSign or a similar tool are fine. The consent should be signed before the action it approves, and then filed in the minute book. See Startup Board Consent.
When a director disagrees, you can’t use a written consent. Hold a meeting, with notice under the bylaws, and record the vote in minutes. See How Do I Take Startup Board Meeting Minutes?.
What if a director is on the other side of the deal?
Founder reimbursements, a founder’s loan to the company, a grant to the only director, or a contract with a director’s other business are all interested transactions. Under Delaware’s 2025 amendments, the safest approach is to disclose the interest and have the deal approved by a majority of the disinterested directors, or by a committee of at least two disinterested directors if they aren’t a majority of the board. On a small board that’s often impossible, so the usual route is informed approval by the disinterested stockholders, or documenting why the deal is fair. See Fiduciary Duties of Founders.
What if we forgot to get board approval?
It happens often: SAFEs signed without a consent, stock issued to a co-founder on a handshake, option grants promised but never approved. Delaware has a formal process for ratifying defective corporate acts. The board adopts a resolution ratifying the act, stockholders approve it where the original act would have needed their approval, and stockholders receive notice. Do it before your next financing, because the investor’s counsel will find the gap in diligence. If an option grant was never approved, the fix is usually a new grant at today’s price rather than a backdated one. See Promising Equity vs Issuing Equity.
What consents does a typical early startup sign?
Formation usually takes an action of the incorporator and an initial board consent that adopts the bylaws, appoints officers, approves founder stock purchases and adopts the equity plan, plus a stockholder consent approving the plan. A first SAFE round adds one consent approving the round. A first batch of option grants adds a consent approving the grants at the 409A price. A small company may sign only a handful of consents a year, but each one matters.
If you’d like help with board consents or cleaning up past approvals, contact us.
