Drafting Your Advisory Board Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Advisory board agreements are a critical component of any successful business, providing a framework for the relationship between the business and its advisors, while also protecting the interests of both parties. As an experienced member of Genie AI’s template library team, I have seen firsthand the importance of having an effective agreement in place. An advisory board agreement is essentially a contract that outlines the terms of engagement and expectations between the business and its advisors. Without this document in place, there can be no guarantee that an advisor will adhere to their duties as outlined by both parties - leading to misunderstandings and potential legal issues.

Having a well-drafted advisory board agreement is also essential for protecting any potential risks that may affect the interests of your business. It clearly outlines an advisor’s responsibilities so as to avoid any discrepancies or complications further down the line. Furthermore, it provides clarity for all involved; making sure each side knows exactly what is expected from them - avoiding conflicts or miscommunications between you and your advisors in relation to their work product or remuneration levels.

Ultimately, advisory board agreements are key components within any successful venture; they provide structure while simultaneously safeguarding each party’s interests at hand. For these reasons, it is essential that all businesses take time out to create a comprehensive and effective advisory board agreement prior to working with an advisor or entering into negotiations on either side.
If you’re looking for guidance on drafting your own advisory board agreement then Genie AI has you covered; with our free template library offering step-by-step advice on how best to proceed with this process - regardless of whether you have a Genie AI account or not! So don’t hesitate - read on below for more information about our template library today!

Definitions (feel free to skip)

Roles and Responsibilities: The tasks, duties and obligations of a person or group.
Compensation: Payment or reward for a particular job or service.
Term: The length of time for which a contract or agreement is valid.
Voting Process: The steps taken to decide the outcome of a vote.
Tie-breaking System: A method of resolving a tied vote.
Non-Disclosure Agreement (NDA): A contract between two parties that restricts the sharing of confidential information.
Conflict of Interest: A situation in which a person or organization has a financial or personal interest in the outcome of a decision.
Exit Agreement: A contract that outlines the terms of a person’s departure from a company or organization.
Signatures: A handwritten name or mark used as a form of authentication.

Contents

• Defining the roles and responsibilities of each party
• Defining the roles of the company
• Defining the roles of the advisory board
• Outlining the responsibilities of each party
• Determining the advisory board’s compensation
• Establishing a payment structure
• Deciding on the payment timeline
• Establishing the advisory board’s term
• Agreeing on an initial term duration
• Deciding on the renewal process
• Outlining the board’s decision-making process
• Deciding on the voting process
• Establishing a tie-breaking system
• Specifying the board’s access to company information
• Determining the type of information that will be shared
• Deciding on the frequency of information updates
• Establishing the board’s authority
• Determining the limits of the board’s authority
• Defining the conditions of the board’s authority
• Crafting an NDA agreement
• Including the confidential details of the board
• Defining the terms of the agreement
• Creating a conflict of interest policy
• Specifying what constitutes a conflict of interest
• Establishing a process for handling conflicts
• Drafting an exit agreement
• Specifying what happens if the board is dissolved
• Establishing a process for members to exit
• Finalizing the agreement with signatures
• Specifying the documents to be signed
• Establishing the procedure for signing and filing the agreement

Get started

Defining the roles and responsibilities of each party

• Determine the role of the advisory board: what duties will it have and what decisions will it make?
• Decide if the board will vote on decisions or if its role is solely advisory.
• Determine how often the board will meet and what type of compensation it will receive for its services.
• Outline the responsibilities of the company and the advisory board: what information will the company provide and what will the board provide?
• Specify any reporting requirements for the board, such as providing regular updates on board activities and providing feedback on company decisions.

How you’ll know when you can check this off your list and move on to the next step:

• All roles and responsibilities of the company and the advisory board have been outlined in the agreement.
• Both parties have agreed on the terms and have signed the agreement.

Defining the roles of the company

• Determine the type of company you are forming and what roles the company will need to fill in order to be successful.
• Decide which roles will be filled by the advisory board and which roles will be filled by the management team.
• List the specific roles and responsibilities of the advisory board in the agreement.
• Make sure that the roles and responsibilities of the advisory board are in line with the company’s overall business plan and goals.
• Determine the term of the agreement and how the roles and responsibilities of the advisory board will be defined and amended in the future.
• When done, review the agreement for accuracy and make sure all roles and responsibilities have been included.

How you’ll know when you can check this off your list and move on to the next step:

• You will know that you can move on to the next step when you have fully defined the roles of the company, the roles and responsibilities of the advisory board, the term of the agreement, and have reviewed the agreement for accuracy.

Defining the roles of the advisory board

• Brainstorm the roles you would like the advisory board to have (e.g. providing guidance, giving advice, making introductions, etc.).
• Decide on the structure of the advisory board (e.g. size, duration, etc.).
• Discuss how the advisory board will interact with the company.
• Outline the expectations of the advisory board in the agreement.
• Once you’ve decided on the roles and structure of the advisory board, you can complete this step and move on to the next one.

Outlining the responsibilities of each party

• List the roles and responsibilities of each party in the advisory board agreement
• Define the process for addressing any disputes between the parties
• Establish a timeline for when the advisory board will meet and discuss important topics
• Outline the expectations for each member of the advisory board
• Agree on how decisions are made and how often the advisory board will meet
• Describe the process for removing members from the advisory board

Once all of the responsibilities of each party have been outlined, you will be ready to move on to the next step.

Determining the advisory board’s compensation

• Outline the compensation the advisory board will receive for their services, such as a stipend or equity
• Determine the amount of the compensation and how it will be paid (e.g. cash upfront or a deferred payment plan)
• Consider if the compensation needs to be adjusted over time to account for changes in the company’s circumstances (e.g. a raise or bonus after a successful funding round)
• Draft the compensation agreement to be included in the Advisory Board Agreement

You can check this off your list and move on to the next step once the compensation agreement has been finalized and included in the Advisory Board Agreement.

Establishing a payment structure

• Determine the type of compensation you will provide to each member of the advisory board. Options include an hourly rate, a one-time fee, or an equity stake in the company.
• If you choose to provide an equity stake, decide whether it will be in the form of stock options or restricted stock units.
• Agree on the total amount of compensation the advisory board will receive.
• Decide how you would like to disburse the payment. For example, will it be spread out over multiple installments or be paid in a lump sum?
• When all details are hammered out, draft the payment structure in the advisory board agreement.

You will know you can check this off your list and move on to the next step when you have a payment structure outlined in the agreement.

Deciding on the payment timeline

• Determine how often payments should be made, such as monthly or quarterly
• Agree on the payment schedule for the advisory board members
• Include a due date for the payments, such as the first of the month
• Decide if late payments will incur a penalty
• Include provisions for any adjustments to the payment timeline due to extenuating circumstances

Once these items have been agreed upon and documented, you can check off this step and move on to establishing the advisory board’s term.

Establishing the advisory board’s term

• Determine the length of the advisory board’s term (e.g. one, two, or three years)
• List any specific activities or tasks that the advisory board will be responsible for
• Decide if the advisory board will need to be renewed or extended upon expiration
• Outline the renewal/extension criteria, if any
• Establish how the board’s term can be terminated
• Agree on a notification period prior to the end of the term
• When complete, add the term duration and other details to the advisory board agreement

How you’ll know when you can check this off your list and move on to the next step:

• When the advisory board and company have agreed on the term duration and written out any other details regarding the term.

Agreeing on an initial term duration

• Discuss and negotiate the initial term duration with your advisory board
• Consider the amount of time and effort each member will have to commit to their role
• Agree on a term length that is appropriate for the amount of work each board member is expected to contribute
• Once you and the advisory board have come to an agreement on the initial term duration, document it in the board agreement
• You can check this off your list once you and the advisory board have reached consensus on the initial term duration and it is documented in the board agreement.

Deciding on the renewal process

• Determine how often the agreement should be renewed, such as annually or bi-annually
• Set a date for the renewal and include a clause that outlines the process of renewing the agreement.
• Include a clause that sets an expiration date of the agreement if it is not renewed.
• Make sure to include any additional details or processes specific to the renewal process.

Once the renewal process has been agreed upon and outlined in the agreement, you can check this step off your list and move on to the next step.

Outlining the board’s decision-making process

• Clearly define how the board will reach decisions, such as by consensus, majority vote, or unanimous decision
• Specify the roles and responsibilities of the members, such as who is responsible for setting the agenda, who will lead the discussion, and who will be responsible for taking notes
• Outline the decision-making process, including how board members will communicate decisions, who will record the decisions, and the timeline for decision-making
• Establish a policy for when and how members can abstain from voting
• Decide how the board will handle a tie

You can check off this step when you have a clear understanding of the decision-making process and have outlined the roles and responsibilities of each board member.

Deciding on the voting process

• Decide whether to have a majority or unanimous voting rule when decisions are being made
• Consider whether any members of the board (or any particular type of member) should have different voting rights
• Determine whether voting will be conducted in person or remotely
• Agree on a quorum size and how it will be determined
• When all of the above are decided, add the voting process and rules to the Advisory Board agreement
• When these decisions have been added to the agreement and all board members agree to them, you can move on to the next step: Establishing a tie-breaking system.

Establishing a tie-breaking system

• Decide who will have the authority to break a tie vote
• This could be a specific individual or the Chairperson
• Outline the tie-breaking system in the agreement
• Make sure all parties involved understand the tie-breaking system
• Once all parties have agreed to the tie-breaking system, the step can be completed and checked off the list.

Specifying the board’s access to company information

• Decide what type of company information can be made available to the board and the extent of the board’s access to the information.
• Outline the types of information that the board can access, such as financial data, customer information, product data and strategy plans.
• Establish a formal process and procedure for the board to request access to company information, such as requiring a written request and providing a timeline for when the board will receive the requested information.
• Make sure that appropriate security measures are in place to protect all company information shared with the board.
• Once these details are outlined in the agreement, review it with the board members and ensure that everyone is in agreement with the terms.

How you’ll know when you can check this off your list and move on to the next step:

• Once all the points above have been addressed and agreed upon by each party, you can proceed to the next step.

Determining the type of information that will be shared

• Identify what type of information the board members are allowed to access and review
• Consider the sensitivity of the information and create a list of what board members will be able to review
• Determine who will be responsible for providing the required information to the board members
• Create a timeline for when the information should be provided to the board members
• Make sure the agreement outlines any restrictions on disclosure and use of the information
• When all information has been determined and agreed upon, document it in the advisory board agreement

You will know you can check this off your list and move on to the next step when you have identified and documented the type of information that will be shared with the board members in the advisory board agreement.

Deciding on the frequency of information updates

• Set a timeline for the frequency of updates that each party agrees to.
• Make sure that this timeline is legally binding in the agreement.
• Specify the exact dates that information will be shared during the year.
• Decide on how often each party will be expected to update each other.
• Outline any extra communication that is needed to keep the board informed.

You can check this off your list when you have outlined the exact dates for information sharing and how often each party needs to update each other.

Establishing the board’s authority

• Establish the board’s authority to make decisions about the company’s operations and strategy
• Outline what topics the board will or will not be able to make decisions about
• Ensure that the board’s authority is limited to matters that are within its expertise
• Clearly define the roles and responsibilities of the board members
• Create a clause that outlines how the board can be dissolved if necessary
• Check that the agreement complies with the company’s governing documents and relevant laws

Once all the above tasks have been completed, you can move on to the next step of determining the limits of the board’s authority.

Determining the limits of the board’s authority

• Determine the limits of the board’s authority such as when the board will meet, how decisions will be made and who will be responsible for making decisions
• Consider who will be responsible for providing financial oversight and approving budgets, personnel decisions, and investments
• Set expectations for the board, such as the number of hours they will be expected to commit, and any other specific expectations
• Establish a process for the board to approve, modify, or reject any major decisions made by the company
• Outline the roles and responsibilities of the board members, as well as what is expected of them
• When the limits of the board’s authority have been determined and set, you can move on to the next step of defining the conditions of the board’s authority.

Defining the conditions of the board’s authority

• Identify the scope of authority the board will have (e.g. approval of financial decisions, approval of hiring decisions, etc.)
• Clarify the decision-making process for the board (e.g. how will decisions be made, how will voting take place, etc.)
• Outline the roles and responsibilities of the board members (e.g. what is expected of each board member, what meetings will they attend, etc.)
• Determine the board’s reporting requirements (e.g. who will they report to, what information will they provide, etc.)
• Specify the board’s duties and liabilities (e.g. who is responsible for what, what are the potential risks, etc.)

You will know you have completed this step when you have determined the scope of authority, clarified the decision-making process, outlined the roles and responsibilities of the board members, determined the board’s reporting requirements, and specified the board’s duties and liabilities.

Crafting an NDA agreement

• Draft an NDA agreement that outlines the confidential information the board members must keep secure
• Include a clause that outlines the consequences of disclosing any confidential information
• Have all board members sign the agreement
• Once all board members have signed the agreement, keep it with other important documents for future reference
• Check off this step when all board members have signed the agreement and it is stored in a secure location.

Including the confidential details of the board

• Make sure the agreement includes the board members’ individual confidentiality agreements
• Include a clause that specifies the board’s confidential information will not be shared with third-parties
• Set out the board members’ individual roles and obligations when handling confidential information
• Outline the board members’ responsibilities for keeping confidential information secure
• Specify the terms of the board’s confidentiality agreement
• Set out the consequences if any board members breach the confidentiality agreement
• When you have included all these details in the agreement, you can move on to the next step - Defining the terms of the agreement.

Defining the terms of the agreement

• Outline the roles and responsibilities of each board member in the agreement
• Establish how often the board will meet and what topics will be discussed
• Detail the amount of time each board member will dedicate to the board
• Describe the voting procedure and decision-making process
• Outline the length of the agreement and the conditions for termination
• Set out the terms of the compensation, if any, that the board members will receive
• Define the intellectual property rights and confidentiality requirements
• List any additional conditions that may be necessary

You will know you can move on to the next step when you have a finalized agreement that covers all the points listed above.

Creating a conflict of interest policy

• Brainstorm a list of potential conflicts of interest that could occur in an advisory board agreement
• Draft a policy that outlines what is considered a conflict of interest, and how it should be handled
• Include any legal terminology that may be required, such as definitions of terms like fiduciary duty
• Ensure that the policy clearly states any repercussions for violating the policy
• Once the conflict of interest policy is drafted, review and revise as necessary
• When you are satisfied with the policy, you are ready to move on to the next step of specifying what constitutes a conflict of interest.

Specifying what constitutes a conflict of interest

• Identify any potential conflicts of interest that may arise between the advisory board members, the company, and/or other stakeholders
• Review existing state and federal laws to determine what qualifies as a conflict of interest
• Draft a policy that clearly states which activities and relationships are considered to be a conflict of interest
• Include provisions that outline the consequences for engaging in activities that conflict with the policy
• Provide a signature line for each advisory board member to acknowledge and agree to the conflict of interest policy

Once you’ve developed the policy and obtained signatures from all advisory board members, you can check this step off your list and move on to the next step.

Establishing a process for handling conflicts

• Determine how disputes between the advisory board and the company will be resolved
• Set a timeline for resolving any disputes
• Designate a person or group to oversee the dispute resolution process
• Outline the process for removing board members
• Include a clause that outlines the methods of communication between the advisory board and the company
• Establish a protocol for how the advisory board will provide feedback to the company
• When complete, this step should be checked off your list and you can move on to drafting an exit agreement.

Drafting an exit agreement

• Research and review any applicable laws or regulations to ensure compliance
• Outline the terms of the exit agreement, including any notice requirements or restrictions on future activities
• Decide on compensation or other benefits that may be provided upon exit
• Ensure that the exit agreement is legally binding and properly executed by all parties
• When the exit agreement is finalized, save copies for the board and for your own records

You will know you have completed this step when the exit agreement is finalized and signed by all parties.

Specifying what happens if the board is dissolved

• Outline the process and timeline for dissolving the board, including how decisions will be made, who is responsible for what, and when the dissolution will be complete
• Make sure to address the return of any funds or assets that are held by the board, as well as the distribution of any remaining funds
• Determine how the board will be dissolved, such as by majority vote, by the board chair, or simply by agreement
• Once you have outlined the process and timeline for dissolution, you can check off this step and move on to the next one.

Establishing a process for members to exit

• Agree on the circumstances in which a member may leave the board, such as retirement, resignation, relocation, or a change in job responsibilities.
• Formulate a timeline for the departure of the member, such as a notice period or a set date.
• Include a condition that states the departing member will not receive any additional compensation for their work.
• Outline the methods that will be used to inform the other members of the board of the departing member.
• Agree on a process for the board to select a replacement member.
• Decide whether the departing member is allowed to retain any documents or other materials from the board.
• Include any provisions regarding the departing member continuing to be bound by the terms of the agreement.

How you’ll know when you can check this off your list and move on to the next step: You will know that this step is complete once the terms of the agreement related to a member’s departure are finalized and both parties have agreed to the terms.

Finalizing the agreement with signatures

• Have all members of the Advisory Board sign the agreement
• Obtain a signed copy of the agreement from each member
• Ensure that all members have received a copy of the agreement
• Confirm that all members are in agreement with the terms of the agreement
• When all members have signed the agreement and a copy of the agreement has been obtained from each member, the agreement is finalized and you can move on to the next step.

Specifying the documents to be signed

• Create and review a list of the documents that need to be signed by each member of the Advisory Board
• Have each member sign a copy of the Advisory Board agreement and any other documents that need to be signed
• Make sure all documents are signed, dated, and witnessed (if necessary) by all Advisory Board members
• Once all documents have been signed and witnessed (if necessary), you can move on to the next step: Establishing the procedure for signing and filing the agreement.

Establishing the procedure for signing and filing the agreement

• Identify who will be responsible for signing and filing the advisory board agreement
• Determine the procedure for signing and filing, including who will retain the signed agreement
• Agree upon a timeframe for when the signed agreement needs to be filed
• Document and include the procedure in the advisory board agreement
• Once the procedure has been established, documented, and included in the advisory board agreement, it will be ready to be signed and filed

FAQ:

Q: What are the differences between the UK and US jurisdictions when it comes to drafting an Advisory Board Agreement?

Asked by Daisy on May 6th 2022.
A: When drafting an Advisory Board Agreement, there are many differences between the UK and US jurisdictions. In the UK, Advisory Board Agreements are subject to company law, while in the US they are subject to both corporate and contract law. In the UK, Advisory Board Agreements will be governed by the Companies Act 2006. This means that all directors are subject to certain duties and liabilities as set out in the Act. In the US, Advisory Board Agreements are subject to both state and federal laws, which vary depending on where the company is located. Additionally, in the US, Advisory Board Agreements may be governed by different types of contracts such as shareholder agreements, operating agreements or partnership agreements.

Q: What should I consider when creating an Advisory Board Agreement for a SaaS business?

Asked by William on October 19th 2022.
A: When creating an Advisory Board Agreement for a SaaS business, there are several important considerations to keep in mind. First, you should consider how you want to structure the board and its relationship with key players such as investors and founders. Additionally, you should consider how you want to manage board members’ compensation and other obligations such as reporting requirements or non-compete clauses. You should also consider whether or not you need any additional legal documents or contracts in place between the board members and your business. Lastly, you should ensure that all of the terms of your Advisory Board Agreement comply with applicable local laws and regulations.

Q: Do I need legal counsel when creating an Advisory Board Agreement?

Asked by Abigail on November 4th 2022.
A: While it is not necessary to have legal counsel when creating an Advisory Board Agreement, it is highly recommended that you engage a lawyer to review your agreement prior to signing it, especially if you are based in a jurisdiction with complex legal requirements. A lawyer can help ensure that your agreement is legally compliant and properly protects all parties involved. Additionally, they can provide advice on any potential issues or conflicts of interest that could arise from certain clauses in your agreement.

Q: How do I ensure my Advisory Board Agreement is enforceable?

Asked by Tyler on June 9th 2022.
A: To ensure that your Advisory Board Agreement is enforceable, it is important to ensure that it complies with applicable local laws and regulations, as well as any applicable corporate or contract law that may be relevant in your jurisdiction. Additionally, it is important to make sure that all of the terms of your agreement are clearly outlined and agreed upon by all parties involved in order to avoid any potential issues or misunderstandings down the line. Lastly, it is important to have your agreement reviewed by a qualified lawyer prior to signing it in order to make sure that all aspects of your agreement are legally compliant and enforceable.

Q: What role does confidentiality play in an Advisory Board Agreement?

Asked by Amelia on December 12th 2022.
A: Confidentiality is an important aspect of any Advisory Board Agreement because it helps protect sensitive information regarding a company’s operations from being disclosed outside of the boardroom. For example, board members may be asked to sign a confidentiality agreement in order to prevent them from disclosing confidential information about a company’s operations outside of the boardroom or using such information for their own personal gain or benefit. Additionally, confidentiality clauses can be used to prevent board members from disclosing confidential information about a company’s operations even after they have left their position on the board.

Q: Are there any specific regulations I need to be aware of when creating my Advisory Board Agreement?

Asked by Logan on July 27th 2022.
A: Yes – when creating your Advisory Board Agreement there may be certain regulations or laws which you must abide by depending on your jurisdiction or industry sector. For example, if your company operates within the financial sector then there may be specific regulations regarding financial disclosures which must be included in your agreement. Similarly, if you operate within the EU then there may be additional regulations regarding data protection which must be included in your agreement as well. Therefore, it is important that you familiarize yourself with any relevant regulations prior to drafting your agreement in order to ensure compliance with applicable laws and regulations.

Example dispute

Raising a Lawsuit Involving an Advisory Board Agreement

• Review the advisory board agreement to identify any potential legal basis for a lawsuit such as breach of contract, misrepresentation of information, or failure to perform an agreed-upon service.
• Gather evidence such as emails, documents, and other records that support the legal claims listed in the complaint.
• File a complaint with the appropriate court and serve the defendant with the complaint.
• Show that the advisory board agreement was breached and provide evidence to support the claim.
• Demonstrate that the breach of the advisory board agreement caused harm or damage to the plaintiff.
• Show that the defendant did not take reasonable steps to mitigate the damages or prevent the breach of the agreement.
• Request that the court award damages to make the plaintiff whole.
• Negotiate a settlement with the defendant that is acceptable to both parties.

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