50 Questions Any Newly Elected Director Should Address

You have been asked to become a member of the board of directors of an entity. Congratulations! However, aside from the distinction associated with being part of the group governing the present and future of such entity, there are a number of obligations associated with being a director.

The COVID-19 pandemic and its extraordinary circumstances are prompting organizations to assess their governance and operational processes. Boards of directors have a great deal of responsibility to continue to improve their operations on an ongoing basis.

As you prepare for your new responsibilities, here are some questions you will need to ask. You will also need to understand the implications of the answers you will receive.

• 1. How many directors on the board of directors?
• 2.  Is there an even or odd number of directors?
• 3.  Are there any designated seats on the board of directors for a particular shareholder (i.e. the founder)?
• 4.  What is the threshold below which such particular shareholders lose their designated seat?
• 5.  Is the CEO also a director?
• 6.  Can the CEO be the chairman of the board of directors?
• 7.  Does the chairman have a casting vote?
• 8.  What materials are sent to the directors prior to a meeting?
• 9.  How much time before a meeting should the materials be sent out?
• 10. What constitutes a quorum of the board of directors to transact business?
• 11. Do you have a method for achieving a quorum in the absence of certain directors?
• 12. Do you require non-voting observers on the board of directors?
• 13. What type of materials do observers received from the corporation?
• 14. Do observers have the right to ask questions and generally participate in the board’s deliberations?
• 15. Will the board have committees?
• 16. Will the management member of the board participate as members of the board committee?
• 17. Are board members compensated by the corporation for attending board meetings?
• 18. Are board members’ expenses for attending board meetings paid by the corporation?
• 19. Are observers paid by the company for attending board meetings?
• 20. Are observers’ expenses paid by the company for attending board meetings?
• 21. Does the corporation compensate its directors?
• 22. Are there any exceptions applicable to directors' compensation?
• 23. Does the corporation have directors’ liability insurance?
• 24. What is the term of the directors’ liability insurance coverage?
• 25. Are all directors’ liability insurance policy paid for?
• 26. As a director, will you be notified by the insurer if the directors’ liability insurance is cancelled?
• 27. What are the exclusions from the directors’ liability insurance coverage? Does the directors’ liability insurance provide for a trailer beyond a directors’ term in office?
• 28. Does the directors’ liability insurance require the insurer the obligation to defend itself?
• 29. Is the corporation obligation to indemnify in the corporations’ by-laws or in a separate indemnification agreement?
• 30. What is the notice period for calling a directors’ meeting?
• 31. Can the notice period for calling a directors’ meeting be shortened in case of an emergency?
• 32. How many meetings of the board of directors are held each year?
• 33. Do the directors attend shareholder meetings?
• 34. Have directors’ powers been withdrawn from the shareholders?
• 35. Are there any legal situations where a shareholder must approve a board action, even if the power of the board has not been withdrawn?
• 36.  What is a conflict of interest?
• 37. What should a director do in the event of a conflict of interest?
• 38. If there is a conflict of interest, can the director take part in the board discussion?
• 39. In a conflict of interest, can a director vote on the matter?
• 40. What would the board of directors do when one or more members were in a conflict of interest?
• 41. Are you aware of the sources of directors’ liability?
• 42. Are you aware of the requirements of a due diligence defence?
• 43. Where can you hold a directors’ meeting?
• 44. Are there any special arrangements required for a meeting by telephone? By videoconference?
• 45. Can a board meeting be held in a foreign country?
• 46. Who can call a directors’ meeting?
• 47. Should a director keep confidential any information received from a corporation?
• 48. Can a director be bound by a non-competition covenant?
• 49. What is the business judgment rule?
• 50. What interest must a director consider when making a decision for the corporation?

Understanding the answers to these few questions is essential to fully grasp the impact and role you will assume as a board member. Inform yourself properly.

Contact our Business Law team to learn more about your obligations.