Working With Your Independent Director: Best Practices for Communication

What Happens After You Appoint an Independent Director?

Once an independent director is officially appointed in your operating agreement, the focus shifts from compliance to governance. A common misconception in the industry is that the director must be involved in day-to-day business operations. In reality, their role is strictly non-operational and their responsibility springs to protect the bankruptcy-remote structure of the entity, not to manage other facts of the operating agreement. Understanding the specific triggers for communication is the hallmark of good governance.

Effective communication ensures that the director is properly informed when their input is required. This allows them to act efficiently without creating unnecessary administrative burdens for your team. In other words, during a typically operating deal without duress, the independent director should not be involved.

Routine Operations versus Material Actions

The independent director does not need to be included on emails regarding tenant matters, routine maintenance, or other daily business. Their involvement is strictly reserved for material actions as defined in your operating agreement that was approved by the lender. This distinction is vital for maintaining the efficiency of your project.

Providing Formal Notice

When a material action is being considered, such as an asset sale that would end up liquidating an asset, you should provide formal written notice to the director. This notice should include a clear description of the proposed action along with all relevant supporting documents to facilitate a thorough review.

Allowing for Sufficient Review Time

While professional service providers are built for responsiveness, it is best practice to avoid last-minute requests. Providing the director with adequate time to review materials and ask clarifying questions ensures they can fulfill their fiduciary duty without delay. As they have not been involved in the day-to-day operations, it will take time for them to understand the current operations.

Using Your Provider as a Central Point of Contact

For large firms, the compliance firm acts as your primary liaison. Rather than attempting to contact the director personally, you should route requests through the provider’s professional staff. This ensures proper logging, expert review, and a more streamlined resp

onse. At SPE Specialists, direct communication with Arun Singh is encouraged and expected. 

The SPE Specialists Commitment to Responsiveness

At SPE Specialists, we provide a dedicated support team for every engagement. This infrastructure ensures that when you need to present a material action for review, your request is handled professionally and efficiently. We facilitate clear communication, manage documentation, and ensure our directors have the information they need to make timely and well-founded decisions. This approach provides essential peace of mind for both borrowers and lenders alike.