What decisions require board approval? A guide for commercial teams

What decisions require board approval?

Board approval is generally required for decisions that fall outside the day-to-day running of the business and materially affect the company, its owners, or its finances. The most common decisions reserved for the board of directors are:

• Amendments to the certificate of incorporation or bylaws, including any change to the company's name, share structure, or governance rules.
• Issuing new stock or other securities, and any change to shareholder or stockholder rights.
• The sale, purchase, or transfer of major assets, including significant real estate or intellectual property.
• Mergers, acquisitions, and joint ventures.
• Taking on significant debt or financing, guarantees, or capital raises.
• Declaring dividends or distributions to stockholders.
• Appointing or removing officers and setting executive compensation.
• Signing large or long-term commercial contracts that commit the company beyond the ordinary course of business.
• Approving the annual budget and material changes to strategy.

Many of these decisions also need written stockholder consent as well as a board vote. The exact list depends on the company's certificate of incorporation, its bylaws, and applicable state corporate law. In Delaware, for example, the sale of substantially all assets and amendments to the certificate of incorporation require both board and stockholder approval under the Delaware General Corporation Law.

Which decisions require board approval in a startup?

Startups that raise equity funding usually have the tightest approval rules, because investors write reserved matters and protective provisions into the certificate of incorporation and shareholder agreements. Beyond the general list above, a funded startup's board or preferred stockholders commonly must approve:

• Any amendment to the certificate of incorporation or bylaws, including an amendment that changes the rights of a class of stock or increases the authorized share count.
• Issuing new equity, granting stock options, or repricing existing options.
• New funding rounds, convertible notes, SAFEs, or taking on venture debt.
• Changes to the company's privacy practices or handling of personal data that create material regulatory exposure, such as adopting a new data processing model or entering a market with strict privacy rules.
• Setting or changing the founders' and executives' compensation and responsibility for signing authority.

Written consent is often used instead of a live meeting for these decisions in early-stage companies. A written consent signed by the required directors (and, where needed, stockholders) carries the same authority as a vote taken at a meeting, provided it meets the threshold in the bylaws and state law.

Do you need board approval before signing large commercial contracts?

As an operations, commercial, or finance professional, you may need to sign a significant commercial contract on behalf of your company. Before putting pen to paper, check whether the deal needs board approval. The answer depends on the size and nature of the contract, your company's bylaws and governance policies, and the potential impact on the business.

Most states' corporate laws grant the board of directors the authority to manage and oversee the affairs of the corporation. This includes the right to approve major transactions, such as large commercial contracts, that could significantly affect the company's operations, finances, or strategic direction. Boards commonly set thresholds and procedures so that significant contracts and transactions are properly reviewed and signed off.

When is board approval typically required?

There is no universal dollar threshold, but board sign-off is generally advisable or mandatory in these situations:

1. Contracts exceeding a certain dollar value. Many companies require board approval for contracts above a specified amount, such as $1 million or more. This figure varies with the size and industry of the business.
2. Long-term or strategic contracts. Deals that commit the company to a long-term relationship or carry strategic weight, such as joint ventures, licensing agreements, or major supplier contracts, often need board approval.
3. Contracts outside the ordinary course of business. If a contract falls outside normal operations or the usual business scope, board approval may be necessary.
4. Conflicts of interest. If a deal involves a potential conflict with a director, officer, or related party, board approval is typically required so the conflict is disclosed and managed.
5. Governance requirements. Some bylaws or governance policies explicitly reserve certain contracts or transactions for the board, regardless of value.

What happens if you fail to obtain board approval?

Skipping board sign-off when it is required can carry serious consequences. In some cases the contract may be void or unenforceable because it was never properly authorized. Directors and officers who enter into unauthorized agreements can also face personal liability for breaching their fiduciary duties.

To reduce these risks, review your bylaws, governance policies, and the relevant state laws to work out exactly when board approval applies. A red, amber, and green risk review against your own playbook, which is where GenieAI is built to help, flags terms that push a deal past your approval thresholds before it is signed.

How should you seek board approval?

When a contract needs board sign-off, give the directors enough information to make an informed decision:

1. Prepare a detailed summary of the contract terms, including the parties, the scope of services or products, the financial implications, and any risks or conflicts of interest.
2. Explain the business rationale and strategic importance of the deal.
3. Provide a risk assessment and mitigation plan where relevant.
4. Allow the board enough time to review the materials and ask questions before the meeting.
5. Document the board's decision, and any conditions or limits on the approval, in the meeting minutes or a written consent.

Following these steps keeps commercial contracts properly authorized and aligned with the company's strategy and risk tolerance.

What qualifies as a material contract?

A material contract is significant to a company's operations, finances, or strategy. There is no precise legal definition, but examples include major customer or supplier agreements, financing arrangements, acquisitions, or real estate leases. The deciding factors are the contract's size, duration, and potential impact. Public companies must file material contracts as exhibits under SEC Regulation S-K, Item 601. Materiality involves judgment, so definitions in the certificate of incorporation and bylaws matter.

Can contract authority be delegated?

Yes. The extent of delegation depends on the company's bylaws and policies. A board can delegate certain contract approval authority to officers or management, while reserving significant or extraordinary contracts for itself. Clear thresholds and procedures for different contract types let teams move quickly on routine deals while keeping oversight on the ones that matter. Spelling out who holds signing responsibility for each tier of contract removes the ambiguity that causes deals to stall.

Should you document board resolutions?

Yes. Documenting board resolutions is good practice, especially for significant decisions like approving major contracts, an asset sale, an equity raise, or a change to the share structure. A written record establishes what the board decided and when, which matters for legal and governance purposes. Resolutions should be recorded in the official minutes or a signed written consent and kept with the company's corporate records.

Publicly traded companies must disclose certain board actions in their regulatory filings. Even for private companies, written resolutions demonstrate proper oversight to stakeholders, investors, and regulators if questions arise later.

What is common practice in growing companies?

For growing enterprise commercial teams, formal board sign-off on every significant contract is rarely feasible. The common approach is an internal approval policy that delegates authority to executives or managers up to set dollar thresholds or risk levels. It is still wise to have the board review contracts that are highly material, involve conflicts of interest, or relate to major corporate actions like acquisitions, funding rounds, or an amendment to the certificate of incorporation. A well-defined non-disclosure agreement often sits alongside these commercial deals to protect confidential terms.

Are there liability risks?

Yes. Directors have a fiduciary duty to oversee major corporate decisions, and failing to do so can expose them to liability for breach of duty. Unauthorized contracts may also be voidable, leading to disputes and financial losses. Clear policies and procedures for deciding which contracts require board approval, based on dollar value, duration, and strategic importance, keep the company and its directors protected. A service agreement or commercial lease that runs past your approval thresholds is exactly the kind of document to route through the board.

GenieAI reviews counterparty terms, flags risk against your own playbook, and drafts ready-to-sign documents, so commercial teams can agree with confidence. Explore the full template library to draft and review contracts without an in-house lawyer.