Advisory Board vs Board of Directors

This article is Part 1 in our four-part series on Advisory Boards.  In this Part, we explain the difference between an Advisory Board and a Board of Directors. In Part 2, we discuss the role of an Advisory Board and how to select members. In Part 3, we outline the benefits of an Advisory Board for you to consider if one might be right for your company. Then, in Part 4, we talk brass tacks — how you can set up the best possible Advisory Board.

Why might I want to appoint Advisory Board members?

I have directors, is that the same thing?

Keeping up with legal, technological, and cultural changes in today’s complex and fast-paced global environment is harder than ever. With a gap in knowledge and skill set, even the most successful businesses can lose their footing and competitive advantage.

That gap in knowledge and expertise is why we recommend considering if an Advisory Board might be right for your business.

What is an Advisory Board?

An Advisory Board member is appointed by a business to share insight and experience, provide strategy, or assist with connecting the business with additional advisors or investors.  An Advisory Board is collectively made up of Advisory Board members, with a role to provide specialist or strategic advice to help solve a range of complex business issues.  For example, if you are looking to break into a new market, you might consider appointing an Advisory Board member that has experience with successful market expansion.

Who does the Advisory Board report to?

An Advisory Board will have a chairman, who is usually independent of the business. The chairman and the Advisory Board members are appointed by the directors of the company, which is who the advisory board reports to.

What is the role of an Advisory Board?

We expand more on this in Part 2 – however put simply, the role of an Advisory Board is to assist a company’s directors (or sole director) to make decisions in the best interests of the company. The Advisory Board does this by sharing their knowledge, experience, and critical thinking with the directors on a range of company issues.

What is a Board of Directors?

A director is a person appointed with ASIC that is legally responsible for the control, direction, governance, and management of the company. A board of directors is collectively the directors of the company.

What is the role of a Board of Directors?

Legally, directors have a fiduciary duty to govern the organisation on behalf of the shareholders, their decisions are binding on behalf of the company. Practically, the Board of Directors is responsible for setting the strategic direction of the company on behalf of shareholders and then implementing that strategy by hiring employees, setting a budget and delivering on projects.

The difference between an Advisory Board and a Board of Directors

The key difference between the two is legal responsibility and liability. An Advisory Board advises the Board of Directors, with the Board of Directors being legally responsible for the operation of the company.

Advisory boards are not legislated within Australia. This means that the Advisory Boards are (generally) not liable for advice that they give to the organisation as the Advisory Board members are not authorised to act or make binding decisions on behalf of the company, unlike directors.

What are the benefits of an Advisory Board?

We have mentioned within this article the foremost benefit of a business Advisory Board, which is bridging a knowledge gap within your company. We consider the wider benefits in Part 2 of our Advisory Board series, the role of an Advisory Board!

To get in touch with our Gild Legal Business and Corporate Advisory team, click here.


For more info and please get in touch with the team here. 

This publication is intended for information purposes only and should not be regarded as financial or legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as financial or legal advice.  If there are any issues you would like us to advise you on arising from this publication, please let us know.