It is undeniable that the past few months have brought challenges and disruption to businesses around the world.

As we begin looking to the future and evolving how we do business, we should be considering ways to remain resilient, help mitigate these difficult circumstances, and work to reset the compass.

Bringing in expert advice, injecting additional experience and keeping costs down can help drive this resilience and help you progress through challenging times. Corporate Advisory Boards (CABs) offer these benefits – and many more – and could therefore be something to consider, particularly if you are a growth-focused small to medium enterprise (SME), or a listed company with specific skill requirements.

What is a CAB?

A CAB is a stand-alone structure separate to the formally appointed Board of Directors. CABs generally provide an additional strategic resource to the incumbent directors and a sounding board for management. They focus on the strategic initiatives, organisational development and financial vision of the company. 

CAB members may be appointed to generally assist in growth strategies, or to provide specific succession planning advice, or transaction input (e.g. around an IPO process or M&A deal). Some members are appointed for specific attributes, such as professional reputation, geographic knowledge or scientific skills. Whilst a retainer of some sort is common, this is typically far less than the costs of a full-time directorship, which necessitates a broader and far more active role.

A quick glance at some of the benefits include:

  • potential to test future director talent pool – opportunity for both sides to ‘try before you buy'
  • immediate injection of expertise and source of strategic thinking
  • can provide a springboard for growth by SMEs, or for specific transaction input, and
  • lower risk (for both parties) than director appointment – advisory role without the decision-making responsibilities.

Increasing trend

The trend in establishing CABs is prevalent in companies of all shapes and sizes and across all industries.

There has been a significant increase in CABs in the SME space, especially in engineering, manufacturing, transport, resources, retail, IT and life sciences industries. It is also a significant trend in the agribusiness space as rural family operations look to corporatise or make other succession plans.

Other advantages

Some of the other advantages to establishing a CAB:

  • obtaining an independent, fresh look (challenge the ‘status quo')
  • easily appointed and removed
  • role can be as specific or general as the company requires (under charter or terms of appointment)
  • access to enhanced skillsets, independent ideas, pragmatic advice (‘been there before') or strategic thinking
  • can be a vehicle for focused growth or transaction-readiness
  • contact with expanded networks and associations
  • expanded reputation and credibility in industry and investor/consumer market
  • mechanism for director/executive succession planning
  • lower cost than director appointment


Prior to appointing a CAB, it is important for the company to determine its objectives. The key objectives will dictate when establishing a CAB will be most advantageous and determine the skill set of the candidates to appoint.

Advisory boards can be appointed for many reasons ranging from macro broad organisational objectives to specific targeted aims. As such there is no right or wrong time to appoint a CAB.  Some common examples of when organisations establish CABs include:

  • the transition from a private company to a public company or public unlisted to listed company – e. a growth company entering the next phase
  • a private or start-up company where a full board of directors is not necessary but outside advice is required
  • additional expertise is an advantage – e.g. a scientific advisory board for a biotech company
  • for a particular large transaction or venture – for input on strategy or building strategic partnerships
  • where a company has a large number of stakeholders and requires broad advice
  • as a succession plan for retiring directors, and
  • not-for-profit entities.

Advisory boards can also play an important role in the supervision of the good corporate governance of the company.


Member appointments to CABs are reflective of the needs of the organisation, but may include experienced professionals such as lawyers or accountants, or specialists with relevant industry or commercial experience.

In addition to considering what mix or specific expertise and experience is relevant and desired, other factors to take into account when selecting an advisory board member include:

  • independence
  • cultural fit and value congruence with the organisation
  • reputation in industry
  • availability and time factors, and
  • working relationship with CEO/management. A CAB can prove to be a tremendous resource for a company CEO and management team, from which to draw advice and executive insight to inform and report to the board.

What are the roles and limits of the CAB?

CABs are independent and distinct from the Board of Directors and CAB members do not have decision-making authority on behalf of the Company.  As a consequence, CAB members are not subject to the same statutory, common law and fiduciary duties that bind company directors.  There are, however, legal and practical issues to consider when establishing or accepting a position on a CAB. In particular, ensuring an advisory board member is not deemed to be a ‘de facto' or ‘shadow' director (and thereby involuntarily invoking these duties) is high on the list of considerations.

Essentially, if the CAB member participates in decisions that affect a substantial part of the company's business, they may be considered a ‘de facto director' of the company. Similarly, if they are a person in accordance with whose instructions the board are accustomed to act, it is possible that the advisory board member would be considered a ‘shadow director'.  If an advisory board member is held out as such, the statutory, common law and fiduciary duties ordinarily attached to duly appointed directors will also extend to those persons.

It is therefore important to select appropriate CAB members for the required advisory purpose and put in place practical measures to prevent any such potential liabilities.

How in practice?

The CAB's role and mandate should be clearly defined and documented to separate the functions of the CAB and the Board of Directors. One way of doing this is to prepare a CAB Charter which sets out the purpose, powers, composition, meeting and procedural requirements and prohibitions of the CAB.

Members of the CAB should not:

  • vote on or purport to pass resolutions on behalf of the board
  • hold themselves out to be directors of the company
  • be a signatory to any bank accounts of the company, or
  • be appointed as a power of attorney for a company.

It is important to ensure that the CAB remains advisory only and that direct participation in decisions that affect a substantial part of the business are avoided. Management must also not be seen to ‘act at the direction of' the CAB. In this regard, board minutes should be appropriately recorded, particularly if a CAB member is present as an ‘observer', and separate CAB committee meetings should be held and accurately documented.


CABs represent a potentially valuable resource to drive growth and profitability. Properly structured, they represent a low-risk, low-cost proposition. By observing these practical guidelines and carefully considering objectives and the composition of a CAB, companies can reap the benefits of readily available, independent and strategic advice while effectively testing potential future decision-makers. It's a ‘try before you buy' option that will suit many organisations

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.