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Circle LLP · October 2026
A bridge, not a destination
Most growth-stage companies do not lack advice; they lack a structured way to receive it. An advisory board offers that structure without the legal weight of a statutory board. Its members counsel management but hold no vote, owe no directors' duties and bind the company to nothing. That limitation is precisely what makes it useful as a transitional instrument: a way to assemble and test a governance team before the company is ready, or permitted, to constitute a formal board.
Where it creates value
Where it creates value
Rehearsal before commitment. A board's effectiveness depends as much on how its members work together as on what each knows. An advisory phase lets founders observe that chemistry, build trust and settle working norms before any appointment becomes difficult to reverse.
Bridging regulatory lead times. In regulated sectors, a board cannot simply be convened. Nigeria's 2023 CBN Corporate Governance Guidelines require bank directors to be appointed by shareholders and approved by the CBN, with a minimum of seven directors (CBN); payment service holding companies apply the CBN's Approved Persons' Regime. While approvals are pending, an advisory board allows proposed directors to engage with the business without exercising powers they do not yet hold.
Credibility at low cost. Recognised advisers signal seriousness to investors and regulators before the company can sustain full board costs.
Where it falls short
Where it falls short
The same features that make an advisory board flexible also limit it. Advisers carry no accountability, so their engagement tends to fade without a defined mandate. Their advice can be ignored at no cost, which weakens its discipline on management. The more significant risk runs the other way. Under section 270 of the Companies and Allied Matters Act 2020, a person on whose instructions the directors are accustomed to act may be treated as a director (CAMA 2020, s.270). Professional advice is excluded, but an advisory board that in practice directs management exposes its members to directors' liabilities without the protections of formal office.
What separates effective transitions?
What separates effective transitions?
The advisory boards that convert well into formal boards tend to share three traits: a written mandate that keeps advice advisory, a stated horizon (often tied to a funding round or a regulatory approval), and composition chosen with the eventual board in mind. Treated as a waystation rather than a substitute, an advisory board can give a company its governance culture before it acquires its governance obligations.
General Information, not legal advice.
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