Starting a U.S. Corporation:What are the Directors and Officers Responsibilities?.

During the creation process of forming a corporation the Articles of Incorporation is the key document that specifies the type of Corporation, number and type of shares that are to be issued and also appoints the officers and board of directors before the first shareholders meeting. This creates a process that is simply a starting point to form the company; it kick-starts the legal and corporation regulation process by creating working frameworks for the business. After the Articles of Incorporation have been filed with the state legislature the directors are then subject to election at the first shareholders meeting to approve or disapprove there appointments as board directors; in the event of a director being disapproved a new director is elected at the meeting.

It is quite a surprising revelation that in most U.S. States corporations are formed with only a single director and in that situation of acting alone in a way that is synonymous to the sole trader acts in the corporation as the board of directors. But in a multi director corporation, which is preferred, individual directors have no authority to make lone contractual agreements or arrangements; decisions that bind the company to legal obligations have to be made collectively by the board by passing a resolution.

The Board of Directors have the central authority and responsibility in a corporation through the following actions:

They appoint and monitor the Corporate Officers: President, Treasurer and Secretary who handle the actual day-to-day running of the business.

The board is responsible for formulating the corporate policies and making key decisions about finances and business. Those policies are first prepared by the directors as corporate by-laws and subsequent corporate policies are briefly explained in board resolutions except when they conflict with the corporate by-laws. When a conflict between by-laws and resolutions occur then a process begins with the by-laws being amended/ updated by the board of directors but formal approval and consent of the shareholders has to be sought typically at an Extraordinary General Meeting, EGM.

From this appraisal it can be seen and appreciated that the role of board of directors plays a pivotal role in the fortunes of the company whose skills and knowledge need to encompass legal, financial and business matters.

It is important to realise that demarcation lines of responsibility and duties exist between these groups of people that are intended to be harmonised together forming the apex of the corporate pyramid structure of organisation.

Shareholders- Elect directors and vote on major key-note decisions such as: mergers, business acquisitions, liquidation, sale of the company and amendments to the Articles of Incorporation.

Directors- Excepting the case of a sole director corporation they act collectively and can authorise entering into business contracts, taking on loans and authorising the use of other financial instruments and major company specific decisions needed to steer the business for it's officers.

But it is crucial to note and understand that the board of directors can delegate their authority to the corporate officers and that may come across as a legal and operational paradox. But if the board decide to delegate authority away from themselves it is only possible through a specific board of directors resolution and a letter to the corporate officers. The Officers entire authority to work for and on behalf of the corporation comes from the board of directors whose decisions are central to the primary business organisation and their structures.

The Corporate Business Model is treated by the State and Federal Government as a separate individual entity rather like that of a person and for this reason all directors board meetings are minuted in detail to show that the people who form the corporate management have acted properly, fairly and with respect for the corporation. The minutes must be detailed and kept as up-to-date records about decisions that are to be implemented by it's officers and actions of the directors are formally documented in resolutions. The resolutions of the board are often needed as evidence of proper governance by financial institutions such as banks and also corporations with whom the company may do business; this type of verification of the corporate records checks to see if authorisation has been granted by the board.