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Financial Empowerment

Observer Rights

At the time of business organization, business founders decide the number of director “seats” that will comprise the company’s board of directors. Privately-held companies usually limit the number of board members to seven or less; while publicly-held large companies operate with a dozen or more board members.

Because of the limited number of board of director seats available within privately-held companies, new investors may ask to attend board meetings as an “observer.” Board meeting guests who enjoy observer rights may listen to board discussions but may not vote on board resolutions. Of course, nothing really prevents individuals with observer rights from speaking up during board meetings.

The Middle Market Definition Covenants
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