Board of Directors
The governing body elected by stockholders that oversees management, approves major corporate actions, and typically includes investor-designated seats after venture financing.
Definition
A board of directors is the body that state corporate law charges with managing, or directing the management of, the business and affairs of a corporation. Under statutes such as Delaware General Corporation Law Section 141(a), directors owe fiduciary duties of care and loyalty to the corporation and its stockholders. In venture-backed MedTech companies, board composition is negotiated in the term sheet and voting agreement: common stockholders (founders) elect one or more seats, each preferred series may designate a seat, and one or more seats may be reserved for an independent director. The board approves budgets, executive hires, equity issuances, and major transactions, and its composition shifts materially with each financing round as new preferred designees are added.What this means in practice
For MedTech companies, board composition matters most at inflection points such as approving a pivotal trial budget, deciding whether to pursue a de novo versus 510(k) pathway, or evaluating a licensing or acquisition offer following a key regulatory milestone. Investor board seats typically come paired with information rights and consent rights over specific actions, so founders should track both who sits on the board and what actions require board versus stockholder approval.Examples
- A five-person board after a Series A might consist of two founder/common seats, one Series A preferred designee, and two independent seats mutually approved by common and preferred. Any board action requires a majority of the five, so investors alone (one seat) cannot unilaterally control outcomes but can block actions requiring unanimous or supermajority consent.
- A company with $2,000,000 in the bank proposes a $3,500,000 pivotal-study budget. The board must approve the budget and any related financing; if the voting agreement requires the Series A director's affirmative vote for spending above a $1,000,000 threshold, the board cannot approve the study budget without that director's consent even if the other four directors agree.
- •Assuming board seats and voting control are the same thing; a minority board seat can still carry blocking rights through separate protective provisions or supermajority requirements.
- •Treating board observer rights (granted to some smaller investors) as equivalent to a director seat; observers typically have no vote and may be excluded from privileged discussions.
- •Failing to update board composition documents (voting agreements, board consents) promptly after each financing, creating ambiguity about who is validly seated.
Frequently asked questions
Related terms
Grouped by themeEditor's picks
· Hand-selected related conceptsClass of equity with rights superior to common stock.
Veto rights held by preferred stockholders (usually voting as a class) over specified corporate actions, negotiated in the certificate of incorporation.
Sequential priced equity rounds in venture-backed companies, typically progressing from product-market validation (A) to scale (B) to growth (C+).
Non-binding outline of the key economic and control terms of an investment.
More in Investment & Finance
· Same categoryAn independent fair-market-value appraisal of common stock used to set tax-compliant strike prices for employee stock options.
Adjustment that protects investors if the company raises a future round at a lower price.
Interim financing between priced rounds, usually convertible.
Rate at which a company spends cash, typically expressed monthly.
Where this term appears across MedTech Terms.
Sources
3 sourcesEvery citation below opens the original document. Each is graded against our source-tier hierarchy so you can see what rests on binding law versus commentary.
- 1Delaware Code Title 8, Section 141Tier 1 UncheckedDelaware General Assemblydelcode.delaware.gov
- 2Cornell LII: Board of DirectorsTier 1 UncheckedCornell Law LIIlaw.cornell.edu
- 3NVCA Model Voting AgreementTier 4 VerifiedNVCAnvca.org
Inline markers like [1] jump to the matching reference above.