Who Decides What, and When

You’ve raised capital, signed the term sheet, and an investor is joining your board. It’s a big step, one that shifts your startup from a founder-led project to a company with shared decision-making.

Board and governance terms define how power, oversight, and accountability are distributed. They determine who gets to decide what, how fast decisions can be made, and what safeguards both founders and investors have when views differ.

Understanding these rights isn’t about mistrust, it’s about clarity. Good governance gives structure without killing agility.

1. What Board & Governance Terms Really Do

A board of directors exists to make strategic decisions, oversee management, and ensure the company is well run. For founders, it should be a mix of guidance and accountability, not bureaucracy.

In early rounds, boards are typically small, usually 3 to 5 members. The most common early setup in venture deals for a 3 member board is:

• Two founders and one investor representative, or

• One founder, one investor, and one independent director, if both sides value a neutral perspective from the start.

The aim at this stage is not to build a large board, but a focused one that can move quickly while still maintaining transparency.

Under Swiss corporate law (Articles 707–726 CO), the board of directors (Verwaltungsrat) is legally responsible for the company’s overall management, organisation, and external representation. It can delegate day-to-day operations to the management team, but it retains responsibility for major decisions and governance (Art. 716 CO).

This is one of the reasons why many Swiss startups convert from a GmbH into an AG once they raise institutional funding. The AG structure provides a clearer framework for formal board oversight, easier share transfers, and more flexibility for future financing or employee participation plans.

2. Control, Consent, and Veto Rights?

When investors join, they often ask for specific protective provisions, meaning decisions that can’t be made without their consent. These are not operational approvals but safeguards for major strategic or financial actions.

Common examples of matters requiring shareholder consent include (the exact list depends on the agreement):

• Changes to the company structure; any amendment to the corporate purpose, relocation of the legal seat, mergers, demergers, conversions, or dissolution.

• Capital and share matters; any creation of preferential shares of any kind (Vorzugsaktien) that are equal to or more beneficial than the existing preferred shares, any creation of new shares with privileged voting rights (Stimmrechtsaktien), any increase of capital against the company's equity, against contributions in kind, against set-off of receivables as well as the granting of special benefits, any restriction of the transferability of shares, any creation of conditional capital, the creation of a capital band, limitation of subscription rights, or changes to the share capital currency.

• Governance changes; introducing a casting vote for the chairperson, holding shareholders’ meetings abroad, adding an arbitration clause, or waiving the appointment of an independent proxy.

• Significant transactions; selling all or substantially all of the company’s business or assets, or any transaction with equivalent economic effect (e.g., permanent IP licensing).

  
  

In Switzerland, these items are usually referred to as “transactions requiring consent” (zustimmungspflichtige Geschäfte) and appear in the shareholders’ agreement. They serve the same purpose as “reserved matters” in Anglo-Saxon law: to protect investor capital without limiting a founder’s ability to run the business.

A good rule of thumb: veto rights should cover decisions that could fundamentally change ownership or risk, not operational or product-level decisions.

3. What Matters to Founders and Investors

Founders and investors usually want the same outcome, a successful and sustainable company, but they approach governance through different lenses.

For founders, the priority is maintaining speed and autonomy. Too many approvals or unclear roles can slow execution, distract leadership, and create uncertainty in daily operations. Founders typically care about:

• Having freedom to operate within clear boundaries.

• Keeping the board small, efficient, and aligned.

• Ensuring governance remains constructive and not restrictive.

For investors, governance is about visibility and accountability. They’re providing long-term capital, often without direct control, and need confidence that big decisions are made responsibly. Investors typically focus on:

• Having access to transparent and timely information.

• Being consulted before major financial or strategic changes.

• Knowing there are guardrails that prevent unexpected risk-taking.

Well-designed governance finds the middle ground. Founders stay empowered to run the company, and investors gain the transparency they need to remain supportive partners.

4. How Law Shapes Control

In Switzerland, the board of an AG carries legal responsibility for management and oversight. The shareholders’ agreement (SHA) and the articles of association (AoA) are the two documents that translate this into practice.

The SHA defines matters that require consent, voting rights, and procedures for decision-making, while the AoA formalises these rights and sets voting thresholds. Most deals follow a simple pattern:

• Simple majority for regular decisions.

• Qualified majority (two-thirds) or consent from a particular group of shareholders for major structural changes such as major share capital amendments, mergers, or liquidation.

Aligning these two levels, board and shareholder approvals, keeps decisions consistent and avoids legal conflicts.

5. Board Composition and Independence

At the beginning, most startups have only the legally required board or rely informally on advisors. Once an institutional round closes, the board is typically formalised into a three-person structure as mentioned above.

As the company matures, investors may request additional representation or a neutral board member if one is not already present. Independent directors help provide objectivity in strategic discussions, reduce the risk of conflict, and signal maturity to future investors.

By later stage funding, boards often expand to five to seven members, sometimes with formal committees for audit, compensation, or strategy. The key is to scale governance only as fast as the company itself.

6. Veto Mechanics and Decision Flow

Term sheets often include tiered approval structures to separate operational decisions from structural ones:

• Board-level consents cover topics like budgets, significant contracts, or financing decisions.

• Shareholder-level consents apply to structural changes, such as issuing new share classes, mergers, or liquidation.

Some agreements also include deadlock clauses to resolve stalemates. If the board can’t reach agreement after multiple votes, the issue is escalated to the shareholders, or an independent director may cast a tie-breaking vote.

These mechanisms keep decision-making functional and prevent governance from turning into gridlock.

7. Best Practices for Founders

1. Keep the board small at the start. A three-person board is effective until complexity truly justifies expansion.

2. Define consent rights clearly. Limit investor approvals to major strategic or financial decisions.

3. Include independence early. A neutral voice builds trust and strengthens governance.

4. Align documents. Ensure the SHA, AoA, and board rules are consistent to avoid legal conflicts.

5. Plan for evolution. Governance should adapt with growth, what works at Seed might not fit at Series B.

Final Thought:

Governance is not about control, it’s about confidence. A clear framework allows founders to execute freely while giving investors visibility and comfort that decisions are made responsibly.

In venture practice, balanced governance is a sign of professionalism. It shows that founders understand not only how to build fast but also how to build sustainably, with structures that attract capital, manage complexity, and stand the test of scale.

If you’re defining or revising your board and governance setup, from veto lists to board seats, let’s talk. Alfred helps founders align governance with growth; practical, compliant, and built to last.