What is an Advisory Board?

Advisory Boards can be useful.

A growing number of businesses are appointing Advisory Boards to help them with strategic direction.

But what is an Advisory Board? We cover here what it is, why it is different to a Statutory Board and why you might consider appointing one for your business.


An Advisory Board is a body, a group of individuals, that are selected to help provide advice and support to a business. More informal than a statutory board, an Advisory Board can provide guidance and expertise to a company, and while their advice is respected and often followed, it is not mandatory or illegal for a business to oblige what this board advises.


What are the benefits of an Advisory Board?

There are several reasons a company may wish to appoint an Advisory Board. Generally the individuals on an Advisory Board are selected because they have expertise and experience in a variety of different areas: sales, manufacturing, marketing etc. Demand for people who are considered ‘experts’ is huge, by seeking them to be an Advisory Board member they can support your business without having to commit a large amount of time or resources.

Using other’s experience, a company can often gain insights into new trends, or information they may otherwise have taken a long time to gain on their own. By creating an Advisory Board of such people, a director can harness all this information and skills in one place and use it to sell/develop/expand more quickly, growing their business faster than they might otherwise do on their own.

Another reason Advisory Boards can be useful to a business in its early stages is to help attract investment – people buy from people. By connecting your business with someone who is highly respected and well known in their area of expertise, you benefit from their advice, but also associating with that person brings your business’s reputation gains weight through their reputation and credentials; something which can have great influence when seeking investment for the future.


How is an Advisory Board member different?

As we mentioned earlier an Advisory Board is not the same as a Statutory Board, and its members are different also. Being a member of an Advisory Board does not make the person a director of the company.

An Advisory Board is not a governing body and as such the board and its members do not have any formal legal responsibilities. This can be of benefit as you may attract people who either do not wish to be or cannot be Statutory Board members.

Members of Advisory Boards are usually volunteers, tend to be industry experts and are brought together to bring different perspectives to the business, to support them and provide practical advice.


What do I need to know when forming an Advisory Board?

We have established that Advisory Boards are not the same as Statutory Boards; they are in no way a substitute for this.

Crucially, when forming an Advisory Board it is important that you have a clear purpose for your board. If you do not have a clear remit, members of an Advisory Board can potentially risk as acting as shadow directors which hinders rather than helps the business.

To that end it is important that you set out a clear objective, terms of refence and remuneration for your advisory board, and of course create a board made up from members who are best equipped to help you achieve that objective so your business benefits from the best possible support and advice.

Read our blog '6 steps for creating a business Advisory Board'.

Find out how Governance360 can help you understand the different types of directors and board roles in our director training course here.