Practical Tips For Investor Directors

1. Ensure that the constitutional documents of the investee company allow:

a) the investor director to divulge information within the fund structure;

b) authorise conflicts of interest for the investor director; and

c) state that there is no obligation on the investor director to account for any third party benefit where any conflict is authorised.

2. Hold regular board meetings to ensure that changes or events are under review regularly. Keep a written record of decisions / rationale for decisions – even manuscript notes are better than nothing.

3. Maintain systems for compliance with “routine” regulatory filings etc

4. Ensure financial information is current and relevant.

5. Be clear on role being performed – shadow, exec or non exec?

6. Remember there are two tests which determine if a company is solvent: cash flow and balance sheet and both are fluid.

7. Be mindful that when a company approaches insolvency, the interest of creditors become paramount.

8. Engage appropriate advisors for the board – experienced sounding board to help guide you, but of itself a protection mechanism in any event.

9. Consider contingency planning, especially if “Plan A” is dependent upon certain things happening / not happening. Be prepared!

10. Beware of “robbing Peter to pay Paul” – treat all creditors equally

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