Board composition review for private company boards

A board composition review checks whether the people sitting on a private company's board still match what the company's own constitution, its shareholders' arrangements and the applicable company law actually require of them, and whether the appointment paperwork behind each seat would hold up if it were ever tested. It is commissioned when a board has grown, shrunk, been diluted by a financing round or inherited members through an acquisition, and nobody has checked lately whether the composition still works on paper as well as in practice. The result is a written assessment the board can act on, not a view delivered in conversation and left there.

A holding company appoints a fourth director to satisfy an investor's side letter, without checking that the constitution still permits a board of that size or that the existing directors' terms say anything about quorum once a new seat is added. Six months later a resolution is challenged because the board that passed it was, on paper, improperly constituted. Nobody had looked at the composition since the last financing round closed.

This page sets out board composition and director requirements that recur across jurisdictions, what a review produces, and what it deliberately leaves for others to perform.

The situation a board composition review addresses

A board rarely changes all at once. A director resigns quietly. An investor's side letter requires a nominee seat. A parent company rotates a subsidiary's directors after a group restructuring, and the paperwork recording each change sits in three different files that nobody has read alongside one another. The company law governing the board's size, quorum and eligibility does not change when these events happen, but the board's actual composition drifts away from what its own constitution and its shareholders agreed to.

The review exists to close that gap before someone with an interest in finding it does the checking instead: a counterparty asking whether a signatory had authority, a liquidator asking whether a resolution was validly passed, or a new investor's lawyers running diligence on the minute book before a round closes. None of those readers care how the drift happened. They care whether the board that acted was, on the day it acted, properly constituted. Where an entity sits in a jurisdiction with a specific live question on this point, the position is set out separately - see, for example, the board composition review for companies in the Abu Dhabi Global Market.

Four triggers, and why timing decides the outcome

Four events reliably start this conversation: a financing round that adds an investor director, a group restructuring that rotates directors across several subsidiaries, a departure that leaves the board below the number the constitution requires, and a regulatory filing that asks the board to confirm its own composition as a condition of something else - a licence renewal, a bank account, a tender. The last of these is the one that catches companies out, because the filing is often the first moment anyone actually counts the directors against what the constitution requires.

Once that filing is submitted with the wrong composition recorded, the entry becomes part of the record the filing sits on. It cannot be withdrawn, only corrected going forward, and the gap between what was filed and what should have been true stays visible to anyone who pulls the file afterwards. The review is timed to run before that filing, not after it, because a corrective version of the same document tends to prompt more questions than the original would ever have raised.

Related decisions about who a board can delegate to, and which matters it must keep for itself, are covered separately - see delegation and reserved matters, which sits alongside this review rather than inside it.

What the work produces, in sequence

The review does not end in a single opinion letter. It produces a sequence of documents, each usable on its own once it exists.

• A composition map: every current director, the date and instrument of their appointment, and whether that instrument still sits in the minute book or only in correspondence.
• A gap analysis against the constitution: whether the number of directors, their eligibility and any residence or nationality condition the articles impose are actually met today.
• A director appointment terms review: whether each appointment letter still reflects the role the director in fact performs, and whether any indemnity or authority granted at appointment has since been overtaken by events.
• A remediation sequence: the specific resolutions, registrations and registered office notifications needed to close each gap, ordered so that closing one gap does not open another.

Each item is dated and versioned, because a board that revisits this six months later needs to see what has changed since, not read the same document again as though it were new. A related question - which resolutions a board actually needs once the gaps above are identified - is addressed in board resolutions required for a composition review.

A board that is about to file something confirming its own composition is better served checking the appointment terms behind each seat now, while a correction is still an internal fix and not a second entry on a public record.

Review your appointment terms. Write to info@hreithlaw.com with the jurisdiction and the structure.

Where this differs by jurisdiction

The questions a composition review asks are the same everywhere: how many directors are required, whether any of them must satisfy a residence or nationality condition, whether the board can act by written resolution or must convene, and what has to be filed when the composition changes. The answers to those questions differ by jurisdiction, sometimes sharply, and a review written against one entity's answers does not transfer to a group's other entities without being checked again.

A group with entities across several jurisdictions - a common-law offshore vehicle alongside a European operating company, for instance - typically finds that the offshore entity's constitution is more permissive on board size and quorum than the operating company's, and that the filing obligation triggered by a change in composition falls due on a different timetable in each. A jurisdiction-by-jurisdiction comparison of director requirements sets out where those differences actually sit before a review is run.

Where a change in composition has to be notified to a registry, that notification is not optional, and once made it is not undone by a second notification saying the first was wrong - the record then carries both entries, and a reader of the file has to work out which one was correct. A related boundary issue, on how far a company's own articles can restrict who sits on the board or takes shares in it, is treated in this note on articles that restrict share transfers. This page states the position in general terms; confirming the specific rule for a given jurisdiction is the first task of any review that follows it.

What this service does not include

This service does not include acting as a director, secretary, nominee shareholder or trustee for the company, and it does not include supplying, sourcing or arranging for another person to take on any of those roles. That boundary is not a matter of preference. In most of the jurisdictions this practice covers, providing a director on a commercial basis, or arranging for someone else to do so, is a licensed activity, and the firm does not hold a trust or corporate service provider licence in any of them. A review that told a client who to appoint, rather than what the appointment has to satisfy, would be offering exactly the service that licence exists to control.

What the engagement provides instead is the analysis a board needs before it appoints, or confirms, anyone: the eligibility criteria the constitution and the applicable company law actually impose, an assessment of the exposure a sitting director carries once appointed, and a marked-up version of the appointment terms that reflects what the role in fact requires. The choice of who fills the seat, and the mechanics of appointing them, remain the board's own decision.

• No acting as director, secretary, nominee shareholder or trustee
• No sourcing, supplying or introducing anyone to fill a seat
• No filing made on the board's behalf without the board's own instruction

Where the boundary above leaves a gap - a board that needs eligibility criteria and an exposure assessment, not a name to fill a seat - that is the point at which the appointment terms themselves are worth a second look.

Review your appointment terms. Write to info@hreithlaw.com with the jurisdiction and the structure.

Frequently asked questions

How often does a board need to revisit its own composition?

There is no fixed interval. The review is prompted by an event - a departure, a financing round, a filing that asks for confirmation - rather than by a date on a calendar. A board that waits for its annual filing to notice a gap has already let that gap sit for as long as the filing cycle allows, which is usually longer than it should.

Does the review change for a company with a foreign parent?

Yes. A foreign parent typically appoints directors from outside the jurisdiction the subsidiary is incorporated in, which raises questions about residence conditions, service of process and whether a local director is needed alongside the ones already appointed, questions a wholly domestic board does not have to ask. The constitution of the subsidiary, not the parent's own governance practice, decides which of those questions actually apply.

What does the review actually require from the company?

Access to the constitution, the minute book and the appointment letter for each current director, rather than a description of how the board currently operates. Most of what the review corrects is a mismatch between what was agreed on paper and what has happened since, and that mismatch is only visible in the documents themselves.

Who inside the company is responsible for getting this right?

Formally, the board itself, and each director individually for their own appointment, not the company secretary or an outside adviser standing in for the board's judgement. The assumption that a director's seat is a formality, filled once and then forgotten, is precisely what a composition review is commissioned to test, because the exposure that comes with the seat does not depend on how seriously the appointment was treated when it was made.

What evidence should the board be able to point to afterwards?

A dated composition map, the resolutions that made each appointment, and a record of when the last review was run, held together rather than scattered across separate files. That record is what a counterparty, a liquidator or a new investor's lawyers will actually ask for, and its absence tends to be treated as though the underlying position were also uncertain, whether or not it actually is.

Lena Marsh – Expert author, board and governance structures. Lena advises on board composition, delegation of authority and director appointment terms across multi-jurisdiction groups. Her work concentrates on the point where a constitution's requirements and a board's actual practice diverge, and on what has to change before that gap is tested by someone outside the company.