An adviser agreement is a legal contract between a company and an individual who will advise the company’s board.
What is an Adviser Agreement?
An adviser agreement is a legal contract between a company and an individual who will advise the company’s board. The agreement sets out the terms on which the adviser will be engaged. The contract is often also known as a board adviser agreement, a business consulting agreement, an independent adviser agreement or a consulting agreement.
When should you use an Adviser Agreement?
An adviser agreement is used when engaging an individual to advise your company’s board. The adviser will typically commit to work for a certain number of hours or days a month. The role will be part-time and broadly defined as they will usually be providing general advice rather than working on a specific project.
If you are looking at engaging someone for a full time role, you should consider whether the individual will be an employee. Employment status is determined by how an individual operates in practice and not the type of agreement you use. In particular, the key factors are (a) mutuality of obligation (i.e. whether the company is required to provide work and whether the individual is required to carry it out), (b) personal service (i.e. whether the individual is required to provide their services personally or whether they could provide a substitute in their place) and (c) degree of control (i.e. how much control the company has over the individual). If the individual is an employee you should use an employment contract rather than the adviser agreement.
If you are looking to bring on an individual for a specific project, you should consider using one of PocketLaw’s consultancy agreements, rather than the adviser agreement. Consultancy agreements include more detail about the services that the individual will be providing as well as clear deliverables that are not appropriate for the role of a board adviser.
Why is an Adviser Agreement important and why should you use it?
Advisers are valuable assets for companies as the arrangement allows a company to benefit from a particular skill set, experience or expertise that it does not have within its existing workforce, without having to use resources such as time and/or money to recruit personnel.
Advisers may want to be involved with the company for a variety of reasons ranging from personal interest to potential financial rewards. An adviser agreement must therefore allow companies to adopt flexible remuneration methods, such as paying the adviser with equity.
Advisers are typically experienced professionals and would expect their agreement with the company to be recorded clearly in a written agreement. A well drafted adviser agreement can help smoothen the negotiation process and give the adviser a favourable impression of your company.
What are the common pitfalls of an Adviser Agreement?
From the company’s perspective it is critical that the contract used properly reflects the employment status of the individual - i.e. a company should only use this agreement where the employment status of the individual is definitely not that of employee. If a company treats an individual as a self-employed contractor when the reality is that they are actually an employee, the company could become liable for unpaid tax and National Insurance contributions (plus interest and penalties) and the likelihood of a dispute on termination (leading to a potential Employment Tribunal claim) is greater.
As advisers will have access to the company’s board, it is essential that the adviser agreement includes robust confidentiality provisions. It is also recommended that the agreement includes restrictions that prevent the adviser from working with a competitor and non-solicitation clauses to prevent the adviser from poaching your employees.
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