Making business decisions in a growing company

The process of making business decisions is simple as long if you only have to deal with yourself and your co-founder(s). As soon as your business grows, decision making becomes increasingly more complex. You are faced with legal requirements, packed agendas, involvement of your new investors and many other factors. Luckily, you don’t have to be a rocket scientist to master the art of decision making. In this article we show you the key elements of business decision making in a Dutch private limited company (besloten vennootschap).

Management Board

Business decisions are made by the management board. You can split these up in two categories: (i) daily management; and (ii) other decisions. Daily management are the ad-hoc decisions focussed on solving short-term operational problems which often require immediate action. They cannot and don’t have to wait until a board meeting is called, because this would constantly put your company’s operations on hold. Board meetings are for all other decisions. Board meetings are best held periodically. Under Dutch law all board members need to attend a board meeting, unless they are not able to attend the meeting for good reasons (e.g. sickness). Check your company’s articles of association, but most times they allow for board members to also attend a board meeting via Skype or a similar conferencing platform. Board members may also decide without calling a board meeting. This may be wished for in case a major decision needs to be taken while everybody is in different time zones. Just like with board meetings, every director needs to be involved and cooperate with this type of decision making. In most cases a document – a written board resolution – will be drafted that has to be signed by all board members. In these digital times board resolutions can also be digitally signed or taken via e-mail, whereby each directors replies “OK” to the e-mail with the proposed resolution.

Shareholders / Investors

The management board makes business decisions and is accountable to the shareholders for its management. However, this accountability may involve approval rights for shareholders with respect to major board decisions. Keep in mind that such rights are a customary condition to an investment by investors. You will therefore also encounter similar approval rights in convertible loan notes. So keep this in mind if you and your founders are contemplating major business decisions. Shareholders may also decide in or outside a general meeting. A number of mandatory formalities and statutory periods have to be observed for calling a general meeting. For this reason a written shareholders’ resolution or a digital vote – if not prohibited by the company’s articles of association –might sometimes be preferred. Before this is possible, all shareholders (including shareholders of non-voting shares) will have to agree to not hold a general meeting and all directors must have been given the opportunity to advise the shareholders on the proposed resolutions, whether the shareholders resolve in or outside a general meeting.

Record keeping

Finally, without a good record of your management and shareholders decisions you will still be left with nothing. This is easy for any written or digital resolutions. For actual meetings of the management board and shareholders it is customary to keep minutes thereof and have these adopted by the board or the shareholders in the next meeting. Should you wish to know more about the legal requirements of decision making, please let us know.