Though lenders require you to have an independent director, if your business is facing financial hardship, choosing the right one can be stressful because you may not know exactly what you need or what to look for.
There are a number of qualities you can and should look for when choosing an independent director. Since having an independent director is a lender requirement, many business owners just think it is a box to check off, not realizing how important this role is. Keep reading so that when you choose the independent director for your business, you know you are making the right choice.
Choose an Unbiased Independent Director
An independent director holds a position on your company’s board. However, they need to be, quite literally, independent and without bias. This means that the independent director will have no ties — financial or otherwise — to your company. This allows them to carefully evaluate situations and veto decisions that might be harmful.
Choose an Experienced Independent Director
The independent will be tasked with making important decisions for your business to protect its viability. You will want to choose someone that has experience with insolvency or businesses nearing insolvency so that they will know what to do in that situation. The decisions that a board faces, and that an independent director specifically may face, Having past experiences will add to their skill set of knowing what works and what doesn’t will help your business in the long run.
Choose a Knowledgeable Independent Director
Independent directors are put in place to help make major decisions about your business’s future. Because of this, it is critical that you choose an independent director that has knowledge about bankruptcy, business finances, and how a corporation runs. Many of the decisions they will be faced with are complex and require advanced knowledge of fiduciary duties and corporate finance. Having a person with this type of background will be an asset to your board and may be the difference between success and failure if your business is considering making a monumentally poor choice.
Choose a Fairly Priced Independent Director
When you’re hiring an independent director, consider the cost. If your business is nearing insolvency or has become insolvent, cost is likely a factor. However, selecting an independent director that is fairly priced is something that should matter. Hiring a cheap independent director from a company that has no reputation may lead to problems later on, while spending beyond your means will not be helpful either. Choose an independent director that works with your budget but that has the right set of qualifications.
Ready to Hire an Independent Director?
If your business is in need of an independent director, have confidence in choosing URA. Our team of experienced, knowledgeable independent directors are waiting to serve on your board. We are happy to answer any questions you might have, and we will provide you with an independent director who is ready to get to work for your business. Contact us today.