Independent Director in Sydney: An important asset of your organisation

Bringing a mix of skills, experience and connections to your company, board members can see a value in your idea since they have worked in your industry. They might have worked for a competitor or some prospective partner and can provide you with industry insight, offering market benefits. The network they have or build in future is crucial. They should be capable of connecting you with other advisors, resources and investors so as to support your business.

After an organisation is funded, business owners usually form a team of five Board of Directors. Among these five members, two are generally the “Investor Directors”, the seed investors or the venture capitalists who control the designation of these seats as part of their investment agreement with the firm. The third director is typically the CEO, that is, one of the founders of the company. The remaining two directors are known as “Independent Directors”. Although they are not institutional investors, their contribution can be more than any financial investment.

Independent Directors play same role as that of other Board Members. Their vote matters and they perform several fiduciary and governance responsibilities under State Law, such as equity issuance, approving stock grants, electing company’s corporate officers and executive compensation. However, your relationship with your Independent Directors can be different from that with your Investor Directors or resident directors.

Owing to his role of being a manager of venture capital or other funds, your Investor Director has certain contractual as well as legal duties and obligations to partners investing in those funds. These obligations and duties can at times conflict with what is beneficial for your business, leading to dispute between Investor Directors and Management. In such a scenario, it is necessary to have someone to support you. This is when your Independent Directors can help you. They can handle these complex situations smartly and act as a mediator when you are at odds with your Investor Directors. Likewise, discussions related to executive compensation are usually awkward. After you have worked for your product for little or no money, you want to get paid once your company is funded and your product is showing traction. This is when an Independent Director can make recommendations related to executive compensation. Getting these suggestions from someone professional can be really beneficial for your business.

How to choose an Independent Director?

Generally, choosing an Independent Director is up to your Investor Director. Sometimes, an Independent Director is mutually known or the investors might choose him based on his experience and skills. Make sure to think about the help you need and comprehend what experience and skills he brings to your business.

It is important to have an Independent Director who has been there to guide you, either as a business owner or a board. The experience they hold really matters since they not only help you tackle difficult situations, but also offer credibility while advocating on your behalf. It is essential to determine if they will be able to help you when:

>> You are looking at down-round financing and you wish to negotiate terms with your current investors
>> You manage a reduction in force and seek economical severance package for your team
>> Board members are ready to bring an experienced CEO to an organisation

In addition, following are a few situations where an Independent Director can be helpful:

>> Managing a Board is a complex task and your Independent Directors can effectively handle this job for you.
>> With the growth of your business, your Board will form committees, usually compensation and audit committees. Your Independent Directors are a part of these committees and can have a fair bit of influence.
>> When it comes to approval of interested transactions, your Independent Directors Sydney, or elsewhere round the globe, play chief role.

An Independent Director is someone you will turn to for finding creative ways to address the concerns expressed by other Board members, seek honest suggestions and share hard truths with. So, make sure to choose your Independent Director wisely, find out what he has to offer and you will surely find a professional who is there to help you and your business succeed.