Startup Board Consent: What Founders Should Know

The initial startup board consent is an important document that outlines the roles and responsibilities of the board of directors in the early stages of a company’s formation. This document guides decision-making processes, sets expectations for board members and establishes accountability measures. 

The purpose of this consent is to ensure that all parties involved are aligned with the vision and goals of the company, and are committed to working together to achieve success. It also provides a framework for addressing potential conflicts or issues that may arise down the road. Overall, the initial startup board consent plays a crucial role in laying the foundation for a successful business venture.

Initial board consents may vary, but below are common resolutions:

• Ratification of Incorporation and Bylaws
• Minute Book
• Election of Officers
• Uncertificated Shares
• Founder Share Issuance
• Employer Identification Number (EIN)
• Incorporation Expenses
• Fiscal Year
• Foreign Qualification to Do Business
• Management of Finances
• Omnibus

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Ratification of Incorporation and Bylaws

Before the first board meeting, three important things must occur for a startup: (1) incorporation, (2) adoption of bylaws and (3) appointment of a board. These actions are executed by the Incorporator. This resolution acknowledges and approves these actions. If you’d like to learn more about the Action of Incorporator, click here.

Minute Book

This resolution requires the company to create and maintain a “Minute Book.” The book shall include but is not limited to: (1) the Certificate of Incorporation and amendments, (2) bylaws and amendments, and (3) minutes of all meetings of the directors and stockholders. Practically, this is typically a folder on a shared drive at the company. 

Election of Officers

Officers manage the company and are appointed by the board. This resolution elects those officers. Though some officers are required by statute and bylaws, the board may add additional officers. One person may hold multiple offices, and officers are not required to be shareholders or board members. The initial officers are generally:

• Chief executive officer (CEO) and president
• Chief financial officer (CFO) and treasurer
• Secretary

Uncertificated Shares

Some startups issue physical stock certificates, but most do not. Stock certificates represent ownership in a company and are physical documents that indicate a shareholder’s ownership of a specific number of shares. However, physical stock certificates have become less common in recent years, particularly among startups, because they are administratively burdensome to manage. 

Instead, most startups use “uncertificated shares,” where there is no physical certificate to transfer when shares are bought or sold. Ownership is transferred electronically through book-entry transfer, typically managed by the startup’s secretary on a cap table management platform such as AngelList, Pulley or Carta. This resolution simply states that the company is not using stock certificates.

Founder Share Issuance

This resolution approves the sale and issuance of shares to the founders. It includes the exact number of shares, the consideration paid, the vesting schedule and other administrative actions related to the share issuance.

Employer Identification Number (EIN)

This resolution directs the officers to apply for an EIN, using IRS Form SS-4, unless the Incorporator has already done so. To learn more about obtaining your EIN, click here. 

Incorporation Expenses

This resolution directs the officers to pay for the expenses of incorporation and organization of the company, as well as the expenses incurred in the formation of the company.

Fiscal Year

This resolution sets the company’s fiscal year. Most startups follow the calendar year, but this may vary depending on the industry.

Foreign Qualification to Do Business

This resolution authorizes the officers to qualify the company to do business as a foreign corporation in each state where the company operates.

Management of Finances

This resolution authorizes the officers to open and maintain bank accounts and set up payroll.

Omnibus

This resolution is a blanket authorization allowing the officers to take any necessary action and execute any agreements to carry out the intent of these resolutions.

Frequency and Format of Board Meetings

The frequency of board meetings will depend on the needs of the company, but it is recommended that they occur at least once per quarter. This allows sufficient time to review financial reports, discuss strategic initiatives, and address any issues or concerns that may arise.

The format of board meetings can vary, depending on the preferences of the members. Some companies may choose to hold in-person meetings, while others may opt for virtual or remote meetings using video conferencing technology. Clear guidelines for how meetings will be conducted, including procedures for submitting reports or presentations in advance, as well as protocols for voting on decisions, should be established.

Many routine board actions, such as approving funding and issuing equity, can often be done through written consent in lieu of a meeting.

By establishing a regular meeting schedule and clear guidelines for how meetings will be conducted, the board can work more efficiently and effectively toward achieving the company’s goals.

In conclusion, the initial startup board consent is a crucial document that sets the foundation for for your startup. The resolutions outlined in this document establish the roles and responsibilities of the board of directors. By setting clear guidelines for how meetings will be conducted and establishing a regular meeting schedule, the board can work more effectively toward achieving the company’s goals.