Dominic is the CEO of Lawpath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the Australian Legal Innovation Index and recently a winner of the LexisNexis 40 Under 40 (APAC).
What is an Advisory Board?
In technical terms, an advisory board is a group of members experienced in business set up to advise the management of your organisation. But in addition to offering vital business know-how and experience, advisory boards can be the best sounding board for your existing business or new startup. Reduce early business errors and easily identifiable mistakes by setting up an advisory board.
If you require legal guidance regarding advisory boards it is advised to contact a business lawyer.
Why do you need an advisory board?
The late Steve Jobs took a failing technology company and turned it into what is arguably one of the most successful companies of the last 100 years. The American business magnate with the investment golden touch, Warren Buffett, has amassed one of the highest net-worths in the world at the helm of Berkshire Hathaway. Marissa Mayer, the new president and CEO of Yahoo!, brought the company’s empire into the 21st century by acquiring the social blogging mammoth Tumblr only a year after her appointment.
In addition to being brilliant business people, all three innovative leaders needed one thing to help them build such successful companies: an advisory board.
Whether you’re leading a successful and profitable company, or your business is starting to stagnate, an advisory board can give you external insight into how your company can take things to the next level or innovate out of that slump.
Why an Advisory Board is vital for your Startup
A company is never too small to need an advisory board. Start-ups can particularly benefit from an advisory board for business advice and expertise. Establishing an advisory board can help with challenges that arise in the set-up phase. Advisory boards can also ensure the business doesn’t lose focus of the big picture, especially when your startup is deciding whether or not to pivot in a new direction. Another advantage of an advisor is cost. Advisory board members are often paid in equity rather than a fee, especially at a time when startups have little access to cash. Advisors can also voluntarily offer their time and resources free of charge.
Advisory board vs Board of Directors: the role of an advisory board
It might seem obvious, but an advisory board is not the same thing as a board of directors. Although an advisory board might offer commercial advice and expertise to your business, there are very practical differences between an advisory board and a board of directors. The advisory board, unlike a board of directors, has no authority or fiduciary duties to the company. Fiduciary duties are a set of legal responsibilities placed on directors by the Corporation Act (Cth) to ensure the proper function and administration of a company. This means that directors can also be legally liable for the company if it goes into receivership and in an extreme situation, directors can be held criminally liable for breaching their duties. An advisor on the other hand has no fiduciary liability to the company. The line between a board director and an advisor is an important one and your business should ensure this line is not blurred.
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