What every director should do when a project approved by a different board, in a different market, comes back for signature.
The consortium's letter is on the screen. Five banks, one set of terms, eighteen months of negotiation finally closed. The CEO calls it the moment the company's next decade became real. The facility agreements are in the pack for signature. The lenders' window closes in six weeks.
The new audit and risk chair turns to the business case at the back of the pack. It's dated eighteen months ago. The demand forecasts, the cost of capital, the competitor map. All of it predates their appointment. It predates the chair's too.
They ask when the board last tested the assumptions.
The CEO answers warmly. "The banks have been through this line by line. They wouldn't lend if it wasn't commercially viable."
Two directors nod. The new chair has a decision to make about the next ninety seconds.
The banks' yes answers the banks' question
The CEO's answer is true. It also answers a different question from the one in front of the board.
A lender asks whether the debt will be repaid, and what it can take if it isn't. It prices its risk, secures it, and fences it in with covenants. Its upside is the margin and the fees. Its downside is protected by security over the company's assets.
The board asks something wider. Is this the best use of the company's capital, balance sheet and management attention for the next ten years? Does it strengthen the company's position in the market it now faces? Can the shareholders live with the downside the banks have priced away?
A project can be bankable and still be the wrong bet. A lender can be repaid in full from a project that destroyed shareholder value. The covenants make sure of it.
So there are two yeses in this story. The bank's yes and the board's yes. Management has delivered the first. It's presenting the second as a formality.
One more thing about the banks. They're better informed than the board for two reasons. The first is that they commissioned reports. Lenders on a project of this size usually commission their own technical adviser, a model audit and a market study. Those reports were written in the last eighteen months, and they're sitting in a data room the board has not seen, even though they were shared with management.
The second is that the banks have spent those eighteen months in conversation with management. Every turn of the term sheet came with questions about the deal, the trading position and the health of the business. The banks have heard management's current view of the company more recently, and in more detail, than the board has.
The first reason gives the board its first practical move, and it costs nothing. Ask for the reports the banks relied on. The second gives it another. Ask management for the latest view of the business it gave the lenders.
The signing is the decision
Eighteen months ago, this board formally approved the project. The minutes say so. Management will point to them.
Read those minutes again. The approval was given on a business case built for a different market, a different rate environment and a gentler competitive picture. It was given by a different chair and different committee chairs. It approved a direction. It committed the company to nothing it couldn't step back from.
The facility agreements do commit it. Financial covenants that cap leverage. Restrictions on dividends. Limits on other capital spending. Security over core assets. Cross-default clauses that reach into every other borrowing the company holds. Once signed, they shape every strategic choice the board makes for the life of the loan.
So the signature is the first irreversible decision. It deserves a business case that's current on the day it's made.
Edition 1 set out four categories of board decision. This project began in the first category, formal approval. Over eighteen months of quarterly updates on "progress with funding", it drifted into the third category, where management acts and reports back. Each update got a nod. Now it's back in the first category, carrying an approval the current board never gave.
A board that no longer sits
Look around the table. The chair who championed this project has gone. So have the chairs of the key committees. The executive team is unchanged. Management carries the full eighteen-month history. Much of the board carries an induction pack and an assurance.
That's an information gap running the wrong way. Edition 4 asked the new director to close it through deliberate work between meetings. Edition 5 asked the departing director to hand over the interpretive map that minutes never capture. Here, the map left with the people who drew it.
The new chair carries an extra weight. This was their predecessor's signature project. Reopening the case can look like a new chair marking territory, or quietly overturning a legacy. Plenty of new chairs feel that pressure and let the item through.
There's a better reading available. A project that matters this much deserves to be owned by the board that signs it. Retesting the case is how this board takes ownership. If the case holds, the predecessor's judgment is confirmed by people who checked it. If it doesn't, the company is spared a decade-long commitment made on stale facts. Either outcome honours the project more than a signature given on trust.
And the previous chair is a phone call away. Ask them what was debated, what was set aside, and what worried them most. That's the handover conversation this board still needs.
The offered answer, again
"The banks wouldn't lend if it wasn't commercially viable." Edition 15 called this kind of sentence the offered answer. It arrives before the question is fully formed, and it's built to settle it.
So apply the same test. Ask the obvious question anyway. What has changed since approval, and what does the case look like on today's assumptions?
If the answer is a second reference to the banks, the board has learned something important about the state of the business case. Nobody can produce a refreshed model in the room. That's what the deferral is for. If management comes back with a refreshed model, revised sensitivities and a candid account of what's moved, the project is robust and the board can approve with confidence.
Defer, and make it count
So back to those ninety seconds. The chair's move is to summarise what the room has just heard and to request views from board members on how best to proceed. The board discusses the matter, noting the business case is supported by papers that are eighteen months old, and defers the approval until the business case is refreshed.
Say so in the meeting, and minute the reason. Then make the deferral as short and structured as the six-week window allows.
The chair writes the brief for the refresh with the committee chairs. It covers what has moved in the macroeconomic and geopolitical setting, and how each shift changes the model. It asks whether the project still strengthens the company's competitive position in a tougher market. It asks for covenant headroom under a realistic downside case. And it states plainly what the company won't be able to do for the life of the facility.
Hold a dedicated session on the refreshed case in week four. Give it a meeting of its own, light on papers and built for challenge. Edition 14 made the case for that kind of session. This one has a deadline attached.
The CEO tells the lenders now that the board is refreshing the case ahead of signature and expects to conclude inside the window. Lenders deal with boards every week. A board that understands what it's signing makes a better borrower. If the window needs a short extension, ask for it early.
Then vote on the refreshed case. Approve it, approve it with conditions, or decline it. Whichever way it goes, this board will have decided.
The honest objection
Six weeks is tight, and delay has a cost. Commitment letters expire. Pricing moves with markets. Management has spent eighteen months on this, and a deferral can read like a vote of no confidence. The lenders may have questions of their own.
Each of those costs is real. Weigh them against the alternative: a covenant package that binds the company for a decade, signed on a case the current board has never tested, in a market that has turned harder.
The deferral is also bounded. A refreshed case by week three, a session in week four, a decision by week six. A management team confident in its case should welcome the chance to show it to the board that will carry the decision. How management responds to the request is itself information.
And if management can't produce a refreshed case inside the window, even with a short extension, the board has learned that the project's foundations were thinner than the update slides suggested. Far better to learn that before signature.
The line that stops this happening again
This board's problem came from a gap in its own design. Its approvals had no expiry date.
Close the gap in the schedule of matters reserved for the board. Add one line. A board approval of a major project lapses twelve months after it's given, or earlier on a material change in the business case, unless the board reconfirms it. Reconfirmation requires a refreshed business case setting out what has changed since the original approval.
Mirror it in the delegation of authority, so management knows the rule before the next project begins. Then the next long negotiation brings the case back to the board at month twelve, while the board still has choices.
What changes for you personally
Your name goes on this approval. So does the name of every director at the table, including those who joined last year.
Good-faith reliance on management is your usual protection. That reliance is strongest when you can show what you relied on. "The banks were comfortable" is a thin record for a decision of this size. Editions 11 and 12 made the point that the record of what you asked, and what you were told, is how a director shows they discharged their duty.
So prepare one question before any meeting where a long-approved project comes back for signature, and ask it of yourself first. What would I need to see to vote yes? Write the answer down. Share it with the chair beforehand. If the chair hasn't called, call them.
In the meeting, ask for what you need. If it can't be provided, say you're unable to approve on the current information, and ask for that to be minuted. Any director can say that sentence from any seat.
Questions to carry into the meeting
- When did this board last test the business case, and how many of us were here when it did?
- What has changed in our market, our region and our competitive position since approval, and where does each change show in the model?
- What did the lenders' advisers conclude, and when can we read their reports?
- What will the covenants stop us doing over the life of the facility?
- What would I need to see to vote yes?
Context Spotlight: Listed, PE-backed, and the committees that carry the refresh
Listed company. The market has probably heard about this project already. It may have been announced at approval, referenced at results and built into analysts' forecasts. That changes the texture of a deferral. The board will need advice on whether the deferral, the refreshed case, or a change in the project's economics creates a disclosure obligation, and on how timing interacts with the company's announcement calendar. Signing a major facility can itself be price-sensitive. Depending on the project's size and the market's rules, shareholder approval may also be in play. The disclosure path shapes the timetable, so the chair and company secretary should plan it on day one of the six weeks and run the refresh alongside it. The annual report matters too. The board's going concern and viability statements will rest on this facility, and directors sign those as well.
PE-backed company. Here the shareholder sits at the table, and in this case the shareholder is as surprised as the new directors. The investor directors have relied on the same quarterly funding updates as everyone else. They haven't taken the lenders' terms, or the current state of the business case, through the sponsor's investment committee. The shareholders' agreement probably makes new debt of this size a sponsor consent matter. So two approvals are needed, the board's and the sponsor's, and the investor directors need time to secure theirs. That changes the character of the deferral. The request for time now comes from the shareholder as well as the new independent directors, and it carries weight with management and with the lenders. Build the investment committee's timetable into the six weeks from day one, so the sponsor's consent and the board's decision arrive together. The sponsor's view is shaped by its fund life and exit plan. A transformational project can make a strong exit story while the leverage it adds stays with the company long after the sponsor has sold. Investor directors owe their duties to the company like every director, and most hold that line well. The independent directors are best placed to ask whether the case works over the life of the loan as well as the life of the fund. They should also ask how the new facility sits alongside existing debt and any intercreditor arrangements.
How the committees strengthen the response. In either setting, the committee chairs carry the refresh. Audit and risk takes the financial model: the integrity of the numbers, covenant headroom under a downside case, and what the facility means for going concern. If the banks' model audit is out of date, it can commission an independent review of the refreshed model. The audit and risk committee reviews the rebuilt scenarios: the geopolitical and macroeconomic shifts since approval, the tougher competitive picture, and what happens to the project when two of them move together. Remuneration looks at incentives. If any part of management's variable pay is tied to financial close, the board should know before it votes. If it is, that may explain some of the urgency to sign. Nominations, or governance, asks the question that made all of this possible. Why did an induction leave a new chair and new committee chairs unequipped on the company's largest commitment, and what will handover look like next time?
Each committee reports into the week-four session. The chair brings the views together. That's where the board's answer gets built.
Language / Clarity / Confidence
This edition exists so you can walk into your next board meeting with the language, the clarity, and the confidence to treat a signature as the decision it is.
Language. Carry "the bank's yes and the board's yes." When management offers the first as proof of the second, the phrase separates them in a single sentence.
Clarity. An approval has a shelf life. The decision that binds the company is the one taken at signature, and it needs a business case that's current on that day.
Confidence. You need the confidence to ask for a deferral on a project everyone wants, with a deadline running and the CEO smiling at the lenders' letter. Ask for it as a structured, time-bound refresh. A board that defers for six weeks to own a ten-year decision is doing its job.
Boardroom Takeaway
For the Chair: "The banks have given their yes. Before we give ours, I want the business case refreshed against today's market, tested in a dedicated session, and brought back to us inside the lenders' window. And I want a twelve-month shelf life on major project approvals written into our schedule of matters reserved."
For you as a board member, before the next approval comes back for signature:
- How old is the business case behind it, and who at this table approved it?
- What would I need to see to vote yes, and have I told the chair?
- Have I read what the lenders' advisers read?
For the CFO building the funding model, the company secretary advising management on how best to approach the board for this approval, or the aspiring director who'll one day take a seat at a table like this one:
- When the lenders say yes to a project in your organisation, how old will the business case be, and who'll be asked to sign it?
Until next time,
Paul