With the help of JAG Shaw Baker we’ve updated the Advisor Agreement template available at Seedsummit.org (where you can find a collection of free startup-friendly legal documents).
This template has been been tailored to meet the specific needs of early stage, high growth companies and reflects the current market standard. It includes the following provisions;
- Appointment terms
- Time commitment
- Role and duties
- Outside interests
- Data protection
- Third party rights
The updated Advisor Agreement has been amended to ensure that, in most situations, it can be used by companies with minimal amendment or legal input. The main changes from the previous version of the agreement include the following:
1. Advisors are no-longer appointed as a director of the company by default
The previous version of the Advisor Agreement also envisaged that advisors would fulfil a non-executive directorship at the company – in practice a non-executive role is usually associated with large companies and is not often relevant for early stage companies.
2. The agreement now more accurately reflects the most common methods of remunerating advisors
Companies will typically want to grant advisors vesting shares or options to acquire shares in the company, rather than paying a flat monthly fee. The latest version of the advisor agreement provides companies with a choice of suitable clauses (with explanatory notes to assist). In this version, it is envisaged that the advisor can be granted shares, options to purchase shares or a paid standard monthly fee.
3. The agreement recognises that advisors may create or develop intellectual property
In practice, the role of an advisor will often exceed the provision of advice, and advisors will frequently provide creative input. The latest version of the advisor agreement recognises that advisors may create or develop intellectual property and includes comprehensive provisions to ensure that the company owns any intellectual property rights that the advisor creates or develops for the company; and
4. Advisors often provide services on an “as and when” basis
The latest version of the advisor agreement has removed the requirement for advisors to commit a fixed period of time in each week to advise the company.
This template advisor agreement is not a substitute for legal advice and may need to be tailored to the circumstances of the company and the advisor in order to maximise the legal protection it offers.