How many managers or directors should have a company? Decide wisely and be clear about the terms of that decision…
When a new business is formed, entrepreneurs ask attorneys: “how many directors should I have?”. Others may also ask: “since this is a single-owner company do I need directors or managers?”. The reality is that if you want to look professional and trustworthy before customers, investors, and strategic partners, you should have a board of directors or at least a clear structure of corporate governance. If you have a single-owner company, you can have a single-member board.
Corporate governance speaks of the company’s organizational structure, where decisions are made after consideration of benefits and costs, advantages and disadvantages, and the company’s policies. Corporate governance exists for purposes of transparency, security, diligence.
Regarding the number of members that a board of directors or managers should have, it is always better to have an odd number to avoid deadlock. Deadlock is the circumstance where two directors or managers do not agree regarding the company’s relevant decisions, and there is no third member to serve as a tie-breaker. Even companies with only one member should consider having a team of managers or directors. The idea is to give the company a clear structure, promote the discussion of decisions, and demonstrate diligence.
What would happen if the only member of the company is another entity?
Whether the company has one or more members having an odd number of managers or directors is always the best. If a company has a single owner, and that owner is another entity with several owners or directors, one must understand how that entity makes decisions. If the owner of a company (Company A) is another company (Company B), it is important to understand that Company B as the single owner of Company A, makes all decisions through the persons that manage it. This means that a board of directors or the managers of Company B will decide the course of Company A. In this case, Company B may want to have an odd number of directors or officers to avoid a deadlock. In the end, what matters is the number of human beings deciding the destiny of the company.