Advisory agreement

curl -X POST https://dealroom.todo.law/api/v1/agent/contracts \
  -H "Authorization: Bearer drk_YOUR_KEY" \
  -H "Content-Type: application/json" \
  -H "Idempotency-Key: $(uuidgen)" \
  -d '{
    "contractType": "ADVISORY",
    "governingLaw": "ENGLAND_WALES",
    "language": "en",
    "party": {
      "legalName": "Your company"
    },
    "counterparty": {
      "legalName": "The other company"
    },
    "terms": {
      "advisor-name": "<advisor-name>"
    },
    "inline": "md"
  }'

What it is and when it is used

An advisory agreement is the contract a company uses to engage an outside expert to give strategic advice, open their network or sit in on board meetings as an observer, without making that person an employee, officer or director. It is common in startups, where advisors are often paid wholly or partly in equity instead of cash.

The Dealroom skill is meant for engaging a startup advisor for strategy, introductions or industry knowledge, for putting an informal advisory relationship in writing before a financing round, for board observer arrangements that stop short of a directorship, and for advisory work paid on success. Throughout, the skill treats the advisor as an independent contractor, and it is built so that employment rules are not applied to the relationship by mistake.

Who signs it and in which role

Two parties sign:

• The Company, which receives the advice and issues any equity.
• The Advisor, an individual who gives the advice.

The parties fill in the facts of the engagement: the advisor's name (required) and professional title, the percentage of equity granted, the expected hours per month (5 by default), any monthly cash retainer, the total vesting period in months (24 by default) and the start date.

Key clauses

The skill negotiates 10 clauses. Nine are required; equity acceleration is optional.

Compensation structure

How the advisor is paid: equity only, a fixed monthly cash retainer with no equity, a hybrid of a reduced retainer plus an equity grant, or success-based pay in which bonus equity or cash depends on milestones such as introductions, fundraising or revenue targets.

Vesting schedule

How the advisor earns the equity over time: equal monthly instalments over 24 months with no cliff, which the skill calls the standard for advisors; a four-year schedule with a one-year cliff, as is usual for employees; or immediate vesting of the whole grant, suited to a one-off contribution or a long-standing relationship.

Time commitment

About 5 hours a month (light-touch advice), about 10 hours a month (regular meetings plus work on specific projects or introductions), or no fixed hours, with the advisor available as needed.

Advisory scope

Strategic guidance only, with no day-to-day involvement; active involvement in defined operational areas such as product, go-to-market or technical architecture; a focus on introductions to investors, customers, partners and candidates; or a non-voting board observer role.

IP and work product

The company owns everything the advisor creates during the engagement, including ideas and suggestions; or the company owns the advisory work product while the advisor keeps pre-existing IP and general methods; or the advisor keeps ownership of everything and grants the company a licence to use the work product.

Confidentiality

Mutual obligations of equal weight, a one-way obligation on the advisor covering company information only, or a stricter mutual regime with handling rules, return or destruction of information and a longer survival period.

Term and renewal

An initial 12-month term that renews automatically for further 12-month periods unless either party gives notice, a fixed 24-month term aligned with advisor vesting and without renewal, or an open-ended engagement that either party can end on 30 days' written notice.

Non-compete and non-solicitation

No restriction beyond confidentiality, so the advisor may work with competitors; non-solicitation only, under which the advisor may advise competitors but may not approach the company's staff, customers or key partners during the engagement and for 12 months after; or a limited non-compete covering direct competitors in the same market segment during the engagement and for a stated number of months after, within a stated territory.

Termination rights

Either party may end the agreement on 30 days' notice for any reason, with vested equity kept; termination only for defined cause such as material breach or fraud, after a cure period; or the company may end it at once while the advisor must give 30 days' notice.

Equity acceleration

Whether unvested equity vests early on a change of control: no acceleration, full acceleration on the change of control alone (single trigger), acceleration only if a change of control is followed within 12 months by the advisor's removal or the lack of a comparable role (double trigger), or acceleration of 50% of the unvested equity.

The standard terms also confirm the advisor's independent contractor status, require disclosure of conflicts of interest, place expenses on the advisor unless the company approves them in writing in advance, and contain representations by each party, including the company's promise that any equity will be validly issued in compliance with securities laws.

What the two sides usually negotiate

The company generally prefers equity-only or success-based pay, a four-year schedule with a cliff, ownership of all work product, one-way confidentiality, a non-compete where the law allows it, the right to end the engagement immediately and no acceleration. The advisor generally prefers a cash retainer, immediate vesting, keeping ownership of their IP, freedom to work with competitors, termination only for cause and full acceleration on a sale.

When the two sides disagree, Dealroom proposes the balanced positions in the skill:

• Compensation: the hybrid of equity and a reduced cash retainer.
• Vesting: 24 months, monthly, with no cliff.
• Time: about 10 hours a month.
• Scope: introductions and network access, with strategic advice only very close to neutral.
• IP: the company owns the advisory work product and the advisor keeps background IP.
• Confidentiality: mutual.
• Term: 12 months, renewing automatically.
• Termination: either party on 30 days' notice.
• Acceleration: double trigger.

On restrictive covenants there is no fully neutral option; non-solicitation only is the position closest to the middle, and it is not available in California.

Jurisdictions and languages Dealroom supports for it

Dealroom drafts this agreement under the law of California, of England and Wales and of Spain, in English or Spanish.

• California: disputes go to the courts of San Francisco County. Equity is issued under the state exemption for compensatory grants, which requires a notice filing within 30 days of the first issuance, and any discounted option must be checked by US tax counsel under section 409A. The agreement notes the 30-day deadline for a section 83(b) election, includes a jury waiver, and states that it imposes no post-termination restraint on the advisor. Only the option with no restrictions is offered.
• England and Wales: the courts of England and Wales have exclusive jurisdiction, any share issue must respect the allotment authority and pre-emption rules of the Companies Act 2006, the advisor confirms that they are not a worker, and liability for fraud is preserved.
• Spain: disputes go to the courts of the company's registered office, shares are issued through a capital increase approved by the general meeting with a waiver of pre-emption rights where needed, and the advisor is treated as self-employed for tax and social security.

Common mistakes

• Applying employment rules to an advisor. Rules written for employees (on inventions, on paid non-competes or on employee share schemes) do not govern an independent advisor. The contract itself must state what applies.
• Presenting a post-termination restraint to a California advisor. It is void, and offering it can create liability on its own.
• A heavy, directed time commitment. If the advisor in practice works under the company's control, the relationship may be reclassified as employment in any of the three jurisdictions.
• Granting discounted options without a valuation. A grant below fair market value can trigger additional US tax under section 409A.
• Missing the California notice filing. The 30-day filing after the first issuance of compensatory equity is easy to overlook.
• Leaving IP to default rules. Without an express assignment, what a contractor creates generally stays with the contractor.