A board of directors and an advisory board are two different entities that have distinct roles. often https://theirboard.com/ there is confusion about the distinctions. This is mainly due to the fact some companies employ the terms interchangeably and the word « board » is one that has many meanings in the business world. This can be exacerbated by not writing down what the role of the advisory council, either through a bylaw or resolutions for boards.
Making a clear, well-documented distinction between your advisory and board of directors will aid in avoiding confusion, especially if are working with people who might not be legally able to serve as directors like teachers who are setting up micro-schools, or experienced entrepreneurs with limited personal shares. This is crucial as a legal board will have responsibilities, liabilities and risks that an advisory board doesn’t.
An advisory board exists to provide a sounding board to the management team and CEO, providing them with advice and connections they may not have access to. Typically, advisory boards do not have the status of shareholders or investors, and do not have a voting interest.
A advisory board, regardless of their expertise in specific fields, does not have the authority or the power to steer an organization. This is because the management team and the CEO are the ones who make decisions and decisions, not the advisory committee. The only way for an advisory board to be granted authority to control the organisation is if they are granted formal board committee status with voting rights and protection from liability through Deeds of Indemnity, Access and Directors and Officers Insurance.
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