Reading time: 4 minutes

All businesses in New Zealand will utilise contracts in their dealings. This is because they consolidate an agreement into one document and allow legal enforceability if your contracting party breaches the terms. The courts can give you damages or can enforce the performance of a legally binding contract. One contract that is less commonly used by businesses is a board advisor agreement. This article will explain what a board advisor agreement is and what clauses it should contain.

What Is a Board Advisor Agreement?

Businesses will sometimes contract a board advisor to help them with strategic decisions. A board advisor is not a board member or director but rather an external person. This means they do not have a vote, but can influence decisions. They are sometimes called special advisors or technical directors.  Board advisors are becoming more prevalent in businesses, and they are usually someone with a wealth of experience in the industry. A board advisor is not usually an employee of the business but rather a contractor. This means that board advisors may advise several businesses. 

A board advisor agreement is a contract that governs the relationship between the board advisor and the business. The contract needs to include certain terms so that both the business and business advisor are protected. The contract’s wording must also be clear to avoid any ambiguities that could cause issues in court. Indeed, clear terms are an element of a binding contract. Therefore, if this is not met, the courts will not find the document legally binding.

Key Clauses

Exclusivity Clause

An important clause that a business should include in its board advisor agreement is one that relates to exclusivity. For example, your board advisor should only be allowed to advise your business exclusively. This is because you do not want your advisor discussing your issues with a competitor. If your board advisor does not want to do this, you can include an exclusivity clause for businesses in your industry so that your board advisor is still able to advise businesses in other industries.

Confidentiality

Another common clause that your board advisor agreement should contain is a confidentiality clause. This is especially important if you are unable to include an exclusivity clause in your agreement. A confidentiality clause will mean that your board advisor will not be able to discuss any parts of your business with anybody else. This protects your business and allows you to trust your board advisor fully. 

Remuneration

Your board advisor will be expecting some sort of compensation for their services. This is usually in the form of a fee. The way you structure the fee will be entirely up to the negotiation you have with your board advisor. They might be paid a fixed amount yearly or could be paid by how many meetings they attend every year. Your remuneration clause will contain what this compensation is and how much it increases by each month. If it is a public company, this will usually be available in the annual report as well as the fees for all the directors of the business.

Termination Clause

The termination clause enforces the terms of the contract. This is because either party will be able to terminate the agreement if the circumstances in the clause are met. This is an important clause as it allows you to cancel the agreement with no further obligations on either party. The circumstances detailed in the contract that allows the termination of the contract will usually be if either party breaches a term in the agreement.

It is important to remember that you are still able to seek damages in court even if one party terminates the agreement. Termination just allows you to get out of the agreement if your contracting partner is no longer upholding their obligations.

Key Takeaways

There are four key clauses you should include in your New Zealand board advisor agreement. Some of the main clauses that should be included in a board advisor agreement are:

  • an exclusivity clause;
  • a confidentiality clause;
  • a remuneration clause; and
  • a termination clause.

If you need any legal assistance with board advisor agreements, LegalVision’s experienced contract lawyers can help. Call us today on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Can anyone enter into a board advisor agreement?

Yes, there is no legal requirement for someone to be a board advisor however businesses will not contract someone who does not have expertise.

Can I terminate the contract at any time?

No, you must meet the conditions specified in the termination clause, otherwise, you could be found to have repudiated the contract which is a breach.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2020 Excellence in Technology & Innovation – Finalist – Australasian Law Awards 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice – Winner – Australasian Lawyer 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2021 Law Firm of the Year - Australasian Law Awards 2021 Law Firm of the Year - Australasian Law Awards
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards