A Brief Introduction About the Board of Directors Agreement
When you are planning to hire board members in your company, then you should have, for each board member, an agreement drafted. In this agreement, the roles and responsibilities of the board of members are mentioned clearly.
Whether you are planning to be a part of the board of director’s team or you are recruiting one in your team, you should know about the agreement which is necessary for it. Here, you can get the overall information about this agreement.
Who Takes the Board of Directors Agreement?
This agreement is mostly taken by nonprofit organizations that are planning to recruit new members in their board of directors team. The outline core values of the company are mentioned in the agreement along with the objectives for the given project.
Purpose of the Board of Directors Agreement
The major purpose of this agreement is to ensure that the board members are able to do their work properly. With the help of the directors agreement, it can be easy for the team to work together in harmony. None of the members would be able to back off from their responsibilities. If something has been mentioned in the agreement, then the person has to agree with it. It also identifies the board of directors’ confidentiality requirements in the agreement
Contents of the Board of Directors Agreement
A standard directors agreement template would include around five to six statements about values of the company. The list of directors is mentioned and their skills and expertise are also determined with the help of this agreement. All the responsibilities and duties of the members are mentioned in this agreement.
How to Draft the Board of Directors Agreement?
A board member agreement would contain provisions outlining the qualifications required from the nominees to the board and their operational duties. It should also note the board of directors’ compensation agreement with the new nominee for the terms on which it has been negotiated. In return, the board member agreement would also mention the obligations a director should have towards the organization.
This agreement typically ends with a pledge by all the directors showing their wilful consent, and being in agreement with all the rules and regulations outlined by the organization. You can take the assistance of a professional attorney while formulating such an agreement. The composition of the board and the responsibilities of the people should be clarified properly. The responsibilities of individuals are also mentioned in the directors agreement.
Whoever wants to do negotiations can do it with the help of a lawyer on the side. You can make arguments with the other person if you have signed the agreement. This is the reason one should read the agreement properly before signing it.
Benefits and Drawbacks of the Board of Directors Agreement
This agreement outlines the relationship between the directors. Even though several directors may collaborate on projects, the agreement lays clear demarcation on the final authority for decision making for that project. No member can break the rules mentioned in the agreement. If somebody does anything against the agreement, then that person has to pay for it regarding violation rules.
What Happens in Case of Violation?
Whenever any party violates this agreement, then that person has to suffer for it. There is a separate section for the punishments a person can get after a law violation.
So, these are the basic aspects of this agreement. If you need to sign such an agreement, it will be best that you read all the guidelines and points before signing it. It will be best if you will be having an attorney by your side that can ensure that the agreement contains no law violations or any kind of professional abuse.
Sample Board of Directors Agreement
You can download the board of directors agreement template from below.