The Company will generally indemnify the Consultant and the anticipated costs associated with any action or proceeding brought against the Consultant or in which the Consultant is otherwise designated as a party or witness due to his or her role in the Company. Assuming that these rights are extended, the agreement should stipulate that the company grants indemnification rights to third parties and does not grant the consultant in his capacity as a director or officer of the company any right to compensation or anticipated costs. Board consultants are individuals with business experience or other relevant expertise who advise a company`s directors and management, most often on management and strategy issues. Advisors to the Board of Directors are appointed voluntarily and sit at the discretion of the Board or management. Board advisors attend board meetings and can advise the directors and management of the corporation, but do not have the real power to make business decisions. The FAST agreement recommends standard equity grants for a single consultant. It is not uncommon for a tech start-up to have a 5% share pool allocated to a group of strategic advisors or an advisory board. The company should also take steps to protect the intellectual property that its advisors may create in the performance of their duties. Developments or other work created by consultants is generally not considered commissioned work owned by the Company. As a result, all intellectual property rights would generally be retained by the consultant. Therefore, the Agreement should include an express assignment to the Company of any development or work prepared by the Consultant as part of its mandate or otherwise resulting from the use of the Company`s confidential or proprietary information. Relationships between Board advisors are generally documented through an advisory board or advisory arrangement. Some companies also adopt separate statutory provisions and articles of association for advisory boards.
Unless the role of a consultant is detailed in the agreement, it may be useful to create an integration note describing the role of the respective advisory board and consultant. In all cases, the Board of Directors of the Corporation must formally approve the creation of the advisory relationship or advisory board with resolutions or written consent, including acceptance of the advisory board`s agreement. Like board advisors, board observers attend meetings of a company`s board of directors and are generally entitled to all information provided to board members. Like board councillors, board observers also have no voting rights. The Founder/Advisor Standard Model (“FAST”) was developed by the Founder Institute to help budding entrepreneurs in the startup programs we run globally set up advisory boards and connect with the mentors they interact with throughout the program. In 2011, the Founder Institute made the FAST agreement public, and since then we have made gradual updates to version 1 of the agreement. The 1. In August 2017, the Founder Institute released a draft version 2 that includes a number of improvements: the advisors targeted by the FAST agreement are founders and senior executives for strategic advice through advisory board roles, and these advisors are typically remunerated by equity.
The FAST agreement is not designed for traditional project consulting and “work for hire” relationships. This article and the accompanying article on board advisors both deal with a corporate governance regime in which the capabilities of the formal board of directors are complemented by persons appointed as observers or advisors. These persons do not have the fiduciary duties of the elected members of the board of directors. Board observers are usually a phenomenon of venture capital-backed companies and represent the interests of these investors. In contrast, the use of board advisors is increasingly becoming a feature of board meetings across the spectrum, including narrow-held family businesses, venture capital or privately funded companies, and publicly traded companies. The exact tasks and responsibilities of a board consultant depend on the specific needs and objectives of the company. Board consultants typically provide the company with knowledge, expertise, and relationships that expand those of the company`s management and directors. For example, an entrepreneurial company may hire board consultants who started their own business to identify common pitfalls or be a sounding board for product ideas or business plans. A mature publicly traded company may hold an advisory board because advisors, not burdened by regulatory and oversight obligations, are free to focus exclusively on strategic topics such as technology improvements, marketing and product development, etc. Contractors must deal carefully with consultants.
Just because someone has a good reputation or expertise doesn`t mean they`re a good consultant or there`s the necessary level of good chemistry. The Founder Institute recommends that an entrepreneur work with a potential advisor for at least a month and spend at least 8 hours together before discussing the FAST agreement. The FAST agreement includes a three-month “cliff” in the acquisition of equity that allows an unproductive advisory relationship to be terminated without the need to allocate equity in the first three months. Like an observer of the board of directors, an advisor to the board should not be considered a trustee of the corporation solely because of his or her role as an advisor. The imposition of fiduciary duties on advisers to the board of directors would be largely incompatible with the corporate law basis of fiduciary duties. The company`s fiduciary duties derive from the concepts of trust – a party that manages an asset for the benefit of another party is bound by standards of diligence and fairness in managing assets for the beneficiary. Thus, because their activities and affairs are managed by or under the direction of the board of directors, the directors of a corporation owe fiduciary duties to shareholders. 2. Damages. In consideration for the services and other obligations to be provided by the Advisor, the Company shall indemnify the Advisor with equity of the type and amount specified in Schedule A, which is subject to an acquisition plan set out in Schedule A and the Agreement to Grant or Issue Equity to the Advisor. Since advisors are not elected and do not have the authority to make business decisions, they do not have fiduciary duties to the Corporation`s shareholders because of their advisory role.
This is a significant difference from the directors of the corporation, who have fiduciary duties and are subject to liability arising from a breach of those obligations. This distinction can be a contributing factor to the increasing use of advisory boards that allow consultants to contribute to the management and strategic planning of the company without the associated tasks (and liability risks) as a director of the company. 13.2. Exclusive Consent. This Agreement, including its Annexes, constitutes the sole agreement of the Parties and supersedes all prior oral proceedings and writings concerning the subject matter of this Agreement. .