Advisory Board Member Contract: A General Guide

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An advisory board member contract is a legal instrument that governs a company's relationship with its advisory board and sets the terms and responsibilities. The agreement specifies what kind of guidance an adviser can provide, how much money they will earn, and when their connection with the organization will terminate. An advisory board advises a corporation on the issues such as new product development or marketing efforts. Let’s know more about several advisory board member contract aspects.

Essential Elements of an Advisory Board Member Contract

The following are explanations of the most common sections of an advisory board member contract:

• Recital Incorporation: The section on the incorporation of recitals provides context for the agreement by summarizing the background and purpose of the advisory board setup. It could include information about the company's objectives, the advisor's qualifications, and the projected mutual advantages of the relationship.
• Term Period: The period of the advisory board member contract is specified in the term section. It specifies the start and end dates of the agreement or gives information about its continuous nature. This section clarifies the timeframe for which the adviser will serve on the board.
• Duties and Responsibilities of the Advisor: It outlines the advisor's obligations to provide the business with direction, information, and suggestions. It may be necessary to fulfill obligations in this area, such as attending board meetings, participating in strategic talks, contributing expertise, and offering comments on crucial decisions.
• Services to be Rendered: The advisory board member's obligations and specific services to the organization are outlined in their contract. These services could include giving strategic counsel, imparting business knowledge, attending board meetings, and offering direction on important choices.
• Minimum Hours of Service: The contract specifies the minimal number of hours that the advisory board member must work for the company. This guarantees that the time commitment needed from the advisory board member is understood clearly.
• Compensation and Equity Arrangements for Advisors: The compensation and equity arrangements for the advisory board member are outlined in this contract clause. The amount of money the advisory board member will be paid in exchange for their services, or the advisor fee, is specified.
• Independence and Responsibilities of Advisor: This part emphasizes the independence of the advisory board member and specifies their job as a consultant rather than an employee. It also addresses expenses, GST, and advisor responsibilities. It specifies that the advisory board member is not an employee of the company and is responsible for covering all costs associated with their duties.
• Compensation: The financial arrangement between the company and the advisor is described in the compensation section. The payment terms are set out, together with the amount or rate of payment, the frequency of payments (such as monthly or quarterly), and any other benefits or perks provided.
• Independent Contractor: The Independent contractor section clarifies the advisor's relationship with the company. It specifies that the advisory board member will work as an independent contractor rather than as a firm employee.
• Relationship Termination: This section covers the circumstances under which the advisor can terminate the contract before it expires. It may include conditions such as the company's breach of contract, changes in the advisor's circumstances, or other legal reasons for termination. This provision assures that the adviser can terminate the contract if necessary.
• Contract Termination by Company: Similarly, the contract termination by company section discusses the situations under which the company might terminate the contract with the advisor. It may include reasons such as the advisor's breach of contract, a shift in the company's strategic direction, or other valid grounds for termination.
• Confidentiality: The section on confidentiality emphasizes the necessity of keeping confidentiality and safeguarding sensitive information disclosed throughout the advisory board interaction. It emphasizes that the adviser must maintain the company's intellectual, private, and trade secret information discreetly during and after the duration of the agreement.
• Miscellaneous: The Miscellaneous part includes provisions that do not fit into other sections but are important to the agreement. It may contain clauses concerning dispute resolution, controlling law, amending procedures, the full agreement clause, and other pertinent provisions.

Steps to Draft the Advisory Board Member Contract

Drafting an advisory board member contract often comprises many key steps:

1. Identify Advisory Board Members. The first stage is to locate persons with the relevant expertise and experience to serve on the advisory board. These people are typically chosen for their industry knowledge, strategic insights, and network connections.
2. Initialize Discussions and Negotiations. After identifying possible advisory board members, preliminary discussions are held to measure their interest and availability. Initial contract negotiations may occur during these meetings, such as setting remuneration, responsibilities, and time commitment.
3. Draft the Advisory Board Member Contract. A formal contract is created once the main provisions have been agreed upon. The contract typically includes key provisions such as the advisory board's purpose, the scope of responsibilities, agreement terms, compensation and equity arrangements, confidentiality requirements, etc.
4. Seek Evaluation and Approval. Before finalizing the agreement, it is best to evaluate it by legal counsel specializing in employment or contract law. The attorney guarantees that the contract conforms with all applicable rules and regulations, protects both parties' interests, and reduces potential legal risks.
5. Conduct Negotiations and Adjustments. Following the legal review, the advisory board member and the corporation may participate in additional matters to address issues or adjust contract terms. Negotiations between the parties continue during this phase until they are both satisfied with the agreement's final form.
6. Finalize by Executing and Signing. The advisory board member agreement is executed and signed once all parties have agreed on the contract conditions. Depending on the preferences of the persons concerned, this can be done electronically or through physical signatures.
7. Start Onboarding. The onboarding procedure starts after signing the contract. This can entail giving the advisory board member the pertinent details regarding the business, its objectives, and ongoing projects. The advisory board member completes their obligations as stipulated in the agreement and becomes formally active.
8. Review Performance. The performance and contributions of the advisory board member are continuously assessed during the contract term. Feedback and evaluations assess the advisory board's performance and decide whether the contract should be renewed or ended after the predetermined term.