Do I Need an Advisory Agreement?

Companies enter contracts with entities, individuals and other companies for a multitude of reasons. The structure of a contract depends on the nature of work and the project both parties are undertaking.

One such contract is an advisory agreement which is signed between advisors and companies availing their services.

This article covers what advisory agreements are, why companies enter one, and what they should include in such an agreement.

What is an Advisory Agreement?

An advisory agreement is a business contract signed between a company and an advisor. The latter offers their services as an external third party and does so for any chosen term. The agreement is either signed at the beginning of the project or for the specific duration which the advisor offers their service.

The agreement details the services that the advisor will perform, the timeline for the service, and the compensation plan. Additionally, it can include provisions regarding confidentiality of information, assignment of supporting teams, and any special considerations.

Do I need an Advisory Agreement?

When working with third parties, it is always beneficial to have a written contract. Similarly, a written and signed advisory agreement can prove advantageous for the company.

The agreement details the responsibilities and obligations of either party and serves as written proof in case of non-compliance by any party. A written formal document makes it easier to prove non-performance and seek legal action or remedies if this issue arises. With a verbal contract, it can be harder to prove what was agreed upon at the beginning of the agreement.

A written agreement also helps keep all parties and relevant stakeholders on the same page regarding their working relationship. All employees can use the document as a guideline to refer to when engaging with the advisor, sharing company resources and data.

Are Consulting and Advisory Agreements the same?

‘Advisors’ and ‘consultants’ are terms that are often used interchangeably. While they are quite similar, they are not the same. Consultants often take on short-term, one-off projects for businesses. Advisors, on the other hand, are associated with companies for the longer-term and offer advice on multiple projects and aspects of the business.

Both work in the capacity of third-party counsel and do not count as employees of the organisation. The relationship is also monthly and non-exclusive (i.e., both consultants and advisors can work with multiple clients at one time). Both advisory and consulting agreements have similar terms and components. The major difference between advisory and consulting agreements is the specific services they provide.

What does an Advisory Agreement Include?

A well-drafted and detailed agreement serves as a guide for the working relationship between the two parties. An advisory agreement should contain the following;

1.    Scope of Work/Engagement

The advisor’s role for the company needs to be recognized in terms of what services they will be offering. This means having detailed descriptions about the responsibilities the advisor will be taking on to ensure both parties are clear on the advisor’s role. Also, the statement can include details about any team formation that may occur to assist the advisor in their obligations. The team can include members from the company and their positions and roles can be described in the statement as well.

2.    Term of Service

The agreement will also outline the timeframe the advisor will be serving the company. A clear start and end date for the agreement can be included. The clauses should contain information about the time of agreement renewal, revision provisions and conditions of termination of the agreement.

3.    Compensation

A compensation plan needs to be added to the agreement. This plan will include details of the amount to be paid – along with the schedule of payments. Additionally, accepted methods of payment should be mentioned.

4.    Changes to Agreement

Provisions to amend and revise the contracting agreement should be added to allow for any changes to the scope of work and the advisor’s responsibilities. In case of external environment changes, the advisor’s terms of service and compensation may be subject to change as well.

5.    Contractual Relationship

These clauses identify the kind of relationship that exists between the company and the advisor. Most advisors work as individual contractors with a non-exclusive relationship between the two parties. Advisors are free to contract with other parties so long as it does not create a conflict of interest or result in the disclosure of sensitive information.

6.    Confidentiality

When working with advisors, the company will be sharing important information such as trade secrets, technical information, business strategies and personnel information. When shared with external advisors, there needs to be confidentiality and NDA clauses in place that prevent the disclosure of this information to unauthorised individuals and parties. Clauses should also detail what information the advisor can use and for what purposes.

7.    Intellectual Property

With two parties working collaboratively, it is important to identify who holds ownership of assets and intellectual property. Often in the case of advisory agreements, ownership of any data, tools, assets, etc. is held by the company. Any licensing agreements should be discussed and detailed in the advisory agreement so that intellectual property can be protected.

8.    Performance of Services

These clauses state that the advisors will offer their services and perform to the best of their efforts. Notably, advisors cannot enter any contracts on behalf of the company until authorised to do so by the company itself.

9.    Limitations

Limitation clauses restrict the advisor’s ability to work with certain companies or undertake some projects for a specified time. This is to prevent any conflict of interest from taking place and secure any pioneering advantages the company may have obtained.

Companies can also use non-solicitation clauses that prevent advisors from poaching company talent, clients, and contacts for a specified time.

Key Takeaways

  • Advisory agreements are contracts with third-party advisors who sign on as independent contractors.
  • Having a written document clarifies the roles and obligations of either party and makes it easier to seek legal action in case of conflict.
  • Agreements should include the scope of work, time duration and compensation plans. Additionally, the agreement should include clauses to protect business information, intellectual property and any other assets.

Drafting business contracts and advisory agreements can be tricky if you are not well-versed with the legalities. Seeking legal counsel can help you draft an agreement tailored to your business needs and protect your legal rights.

If you’re in the process of drafting business contracts and agreements, the team of business lawyers at Lazarus Legal can help you draft contracts that serve and protect your corporate and legal interests. Schedule an appointment today to get in touch with our experts on contract law.

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Mark Lazarus

Mark Lazarus, the visionary behind the business and the fresh blood of the Lazarus Legal team, Mark (or Laz as he is often known) owes much of his success to his past experiences. And he’s made it his personal goal to bring that wisdom and formula to the firm.

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Do I Need an Advisory Agreement?

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Barry Lazarus

CEO & Notary Public

barry@lazaruslegal.com.au 

We’d be lying if we told you that this bloke isn’t the big honcho of our team, but his name is a dead give-away. The founder of Lazarus Legal, Barry is an old school, tough as nails lawyer. They don’t forge litigators like this anymore.

With decades of experience in both Australia and South Africa, his wisdom is as renowned as his name. Back in the days when Schwarzenegger and Van Damme were kicking ass on VHS, Barry was kicking ass in the courtroom. And after all these years, he still has a reputation for refusing to back down.Barry is definitely the badass you’d want in a fight – in court or otherwise. But really, he’s a big softie. Just don’t let him know you know that (although he probably won’t read this anyway – navigating the Internet is not his strong point).

Aside from putting other lawyers in their place, taking long walks on the beach and spending time with his family, Barry enjoys seeing others succeed. Not only is Barry a staunch and unmoving litigator, he has sharp business and commercial acumen having started up ventures from scratch and growing them into full-blown franchises – from real estate to creating ice cream, to making pasta. With his experience on both sides of the commercial and legal equation, you want this guy to be on your side, whether you’re the next Zuckerberg realising your genius, or the next Zuckerberg taking on your opponents in court.

When Barry is not busy lawyering about, he is a part-time lawn bowler and a wannabe comedian, but never took both as a day job, because let’s face it, he’s a lot better at his day job.

If someone ever threatens you to lawyer up…relax, call Barry and he’ll handle the rest. 

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Mark Lazarus Director

Mark Lazarus

Director

mark@lazaruslegal.com.au 

The visionary behind the business and the fresh blood of the Lazarus Legal team, Mark (or Laz as he is often known) owes much of his success to his past stories and experiences. And he’s made it his personal goal to bring that wisdom and formula to the firm.

He’s a bit of jet setter, splitting his time between Australia and the UK, maximising every hour of his professional life. He thrives on this adrenalin. It allowed him to work in private practice in Sydney, act for a host of famous celebrities in London, do a two year stint as a NSW barrister (and not the pretentious coffee type in the Melbourne laneways) and more recently did a gig as the Legal Director covering Europe, the Middle East and Africa for one of the world’s coolest fast-moving consumer good brands!  

As an Aussie and UK lawyer and former barrister, Mark not only has the gift of the gab but he’ll walk the walk to prove it too. He likes to think he’s a bit like Harvey Specter or Michael Corleone, the main difference is you can actually retain him as your lawyer and consigliere. He’ll tell you how it really is and will take on any challenge head on. Although litigation and court advocacy comes naturally to him, commercial and IP is what gets his blood pumping! 

When Mark is not out there doing his thing, you will probably catch him chilling at home with his family, on the sidelines of the soccer (football) pitch cheering on his two boys, crawling through mud obstacles, or training hard at the gym. Passion and commitment is what drives Mark to succeed, along with his burning desire to disrupt the legal profession by finding new ways to change the game.

He has sights on the future. So if you’re breaking new ground, ahead of the times, and on the verge of something big, but you need someone who’s got your back and who can give you straight up advice, this is the guy you will want on speed dial.

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