Entrepreneurial Finance · Appendix
Governance (Optional): 7 Key Terms
By Devon Coombs, CPA, MBA · Teaching Professor of Finance, Santa Clara University · Reviewed August 2026
Post-investment governance covers the rules and roles that direct a venture-backed company after a financing closes, when investors typically hold board seats and contractual rights. Terms such as fiduciary duty, duty to common, independent director, board observer, executive session, and information rights define who owes which obligations to whom inside the boardroom. This vocabulary becomes especially consequential near insolvency, when duties can shift toward creditors, and it anchors the optional governance appendix of the free Entrepreneurial Finance course.
These terms are taught in Appendix: Post-Investment Governance & Board Dynamics of the free Entrepreneurial Finance course; the full course glossary collects every chapter in one place.
- Board observer
- A person entitled to attend board meetings and receive materials but without a vote; a common compromise short of a full board seat.
- Duty to common
- The principle (sharpened by In re Trados) that when preferred and common interests diverge at an exit, directors are bound to act for the common stockholders, not simply to deliver the preferred's return.
- Executive session
- A portion of a board meeting held without management (or without the CEO) present, used to speak candidly, including about the CEO's performance.
- Fiduciary duty
- A director's legal duty of care and loyalty to act in the interest of the corporation and its shareholders as a whole, not any single investor or the founder alone.
- Independent director
- A board member who is neither a founder nor an investor representative, often added at Series A to balance the board and cast a swing vote.
- Information rights
- Contractual rights, usually held by major preferred holders, to receive regular financial statements and to inspect company records.
- Insolvency (creditor standing)
- At actual insolvency (per Gheewalla), creditors gain standing to bring derivative claims for breaches of duty to the corporation; the mere "zone of insolvency" does not by itself create direct duties to creditors.
More Entrepreneurial Finance term guides
Put the vocabulary to work: the free calculators and decision guides apply these terms, and the free Entrepreneurial Finance course teaches them in context.