Bringing an advisor into your business can be a huge win.
Maybe it’s a former founder who’s “seen it all before”, a well-connected industry expert, or someone who can open doors to investors, customers, suppliers, or strategic partners. Often, they’ll be helping you at a crucial stage - when you’re moving fast and making big decisions.
But here’s the part many founders don’t think about until there’s a problem: what exactly has the advisor agreed to do, what do they get in return, and who owns anything they help create?
That’s where an advisory agreement comes in. This guide is updated to reflect current expectations around confidentiality, IP, and equity-style incentives, and to help you set up your “legal foundations” properly from day one.
What Is An Advisory Agreement (And Why Does It Matter)?
An advisory agreement is a contract between your business and an advisor that sets out:
- what the advisor will do (and what they won’t do)
- how and when they’ll provide advice
- how they’ll be paid (cash, equity, or another benefit)
- confidentiality and data handling expectations
- who owns intellectual property (IP) created during the advisory relationship
- how either party can end the arrangement
- what happens if there’s a dispute
In other words, it takes the “handshake deal” and turns it into something clear and enforceable.
This matters because advisors often sit in a grey zone. They’re usually not employees, and they may not be contractors delivering a defined project either. Without a tailored agreement, it’s easy to end up with mismatched expectations - and hard to fix later when money (or equity) is on the line.
Advisory Agreement vs Employment vs Contractor Agreement
It’s common to confuse these arrangements. A quick way to think about it is:
- Employees are part of your team, subject to direction, usually working regular hours, and covered by employment laws. If you’re hiring someone in that capacity, you’ll typically need an Employment Contract.
- Contractors are usually delivering a service or outcome (for example, marketing, development, design). For that, you’d normally use a Contractor Agreement.
- Advisors are typically giving strategic guidance, introductions, mentoring, or occasional input - often without day-to-day operational involvement.
The right document depends on the reality of the relationship, not just the label you give it. If you call someone an “advisor” but treat them like an employee (set their hours, manage them like staff, integrate them into operations), you can create legal risk - including around employment rights.
When Do You Actually Need An Advisory Agreement?
You don’t always need a formal advisory agreement, but it’s strongly recommended whenever the advisor will have:
- access to confidential business information (financials, product roadmap, customer lists, pricing)
- influence over key decisions (strategy, fundraising, partnerships)
- an ongoing role (even if it’s “just one meeting per month”)
- any expectation of payment, equity, or a future benefit
- any role in developing ideas, branding, product features, or materials
Even if the advisor is a friend, a former boss, or someone you “trust completely”, having the terms written down can actually protect the relationship. It avoids awkward conversations later because you agreed on the rules upfront.
Common Scenarios Where Founders Get Caught Out
Advisory arrangements often start informally, which is fine - until the business gains traction. Here are a few situations we see regularly:
- “We’ll figure out the equity later.” Later turns into a dispute about how much, when it vests, and what the advisor actually delivered.
- The advisor shares your deck or idea. Maybe it was accidental, maybe not - but without confidentiality terms, it can be hard to respond.
- They introduce you to someone and claim a commission. If referral fees weren’t discussed, you’re left negotiating under pressure.
- They help shape the brand or product. If IP ownership isn’t clear, you can end up with uncertainty over who owns what.
- You want to move on. Without a termination clause, ending the relationship can be messy, especially if equity has been promised.
If any of these feel even remotely possible in your situation, it’s usually time to put an advisory agreement in place.
What Should Be Included In An Advisory Agreement?
A good advisory agreement is practical. It doesn’t just list legal concepts - it reflects how you’re actually working together.
Below are the clauses that typically matter most for New Zealand startups and small businesses.
1. Scope Of Advice (And Boundaries)
This section answers a basic question: what are you actually engaging the advisor to do?
For example:
- monthly strategy calls (and approximate time commitment)
- reviewing pitch decks and investor materials
- introductions to potential partners or customers
- mentoring founders or leadership coaching
- technical or product guidance at a high level
Just as importantly, it can clarify what the advisor isn’t responsible for (for example: day-to-day management, signing deals, supervising staff, or giving legal/financial advice).
This protects both sides. You’re less likely to assume they’ll do more than they signed up for, and they’re less likely to get pulled into operational work that creates confusion or liability.
2. Fees, Equity, Or Other Rewards
Advisors can be paid in different ways:
- Cash fee (hourly rate, fixed monthly retainer, or per-session fee)
- Success fee (for example, a fee if fundraising closes)
- Equity or options (often with vesting over time)
- Non-monetary benefits (product credits, publicity, access to events)
If equity is involved, clarity is everything. You’ll want to document:
- how much equity (or what percentage)
- what type (shares, options, or another arrangement)
- when it is earned (e.g. monthly vesting or milestone-based)
- what happens if the advisory relationship ends early
Depending on your structure, you may need to tie this into share issuance mechanics or vesting documentation. Where vesting is part of the deal, a Share Vesting Agreement can be a clean way to document the conditions.
And if you have multiple founders or investors, it’s worth ensuring your internal rules align too - for example, your Shareholders Agreement may have pre-emptive rights, consent requirements, or other controls that affect what you can offer an advisor.
In practice, advisors will often see information you wouldn’t want shared publicly - or with competitors.
A strong confidentiality clause should cover:
- what counts as “confidential information”
- how the advisor must store and protect it
- who they can disclose it to (if anyone)
- how long confidentiality lasts (often beyond the end of the relationship)
This becomes especially important when you’re sharing pitch decks, financials, customer pipelines, product specs, or marketing plans.
Confidentiality obligations can also support your compliance under the Privacy Act 2020 if the advisor may come into contact with personal information about customers or staff (for example, contact databases or CRM exports). If you’re collecting customer data online, having a Privacy Policy in place is often part of building a consistent compliance framework.
4. Intellectual Property (IP) Ownership
This is a big one, and it’s often missed.
If your advisor helps you develop anything - even something that feels informal, like refining your brand positioning or shaping product features - you need to be clear about who owns those outputs.
Your advisory agreement can state that:
- any IP created specifically for your business is assigned to the business; and/or
- you receive a licence to use what the advisor created; and
- any pre-existing tools or frameworks owned by the advisor remain theirs (but you can use them in a defined way)
Without this, you can end up with uncertainty that affects investment, fundraising, or even a sale of your business later. Buyers and investors often ask, “Do you actually own what you’re selling?” and unclear IP can slow down due diligence.
If you need a standalone document to deal with ownership transfer, an IP Assignment is commonly used alongside (or within) the advisory agreement.
5. Conflicts Of Interest (And Competitor Issues)
Advisors often work with multiple businesses. That’s not necessarily a problem - but it needs boundaries.
A conflicts clause can cover:
- whether the advisor can advise competitors (and what “competitor” means)
- what happens if a conflict arises later
- whether the advisor must disclose certain relationships
This is less about being overly restrictive and more about transparency. You don’t want strategic advice being influenced by competing loyalties - and the advisor doesn’t want to accidentally breach your expectations.
6. Term, Termination, And What Happens Next
Most advisory relationships aren’t forever. Your agreement should deal with:
- how long the arrangement runs (fixed term or ongoing)
- how either party can end it (notice period, immediate termination for serious breach)
- what happens to unpaid fees
- what happens to equity that hasn’t vested (if relevant)
- ongoing obligations after termination (confidentiality, IP assignment, return of materials)
Termination terms are especially important if the relationship ends on less-than-perfect terms. It’s much easier to rely on a written process than to negotiate an exit while emotions are running high.
What Laws And Compliance Issues Should You Think About?
An advisory agreement is a private contract, but it sits within a wider legal environment. The key is to make sure your advisory arrangement doesn’t accidentally create compliance issues elsewhere in your business.
Employment Misclassification Risks
In New Zealand, simply calling someone an “advisor” won’t necessarily prevent them from being treated as an employee if the reality looks like employment.
Warning signs can include:
- they work set hours each week
- they’re managed like staff
- they’re integrated into the business (e.g. leading teams)
- they’re economically dependent on your business
Why does it matter? If the relationship is really employment, you can face claims around leave, termination process, and minimum entitlements.
Getting the structure and documentation right upfront can reduce this risk. If you’re unsure whether someone should be an advisor, contractor, or employee, it’s worth getting tailored advice early rather than trying to “fix it later”.
Consumer Law And Advertising Claims (If Advisors Shape Your Marketing)
Advisors sometimes help with marketing strategy, website copy, or claims about what your product can do.
If your business deals with consumers, you’ll want to make sure your marketing doesn’t create legal exposure under the Fair Trading Act 1986 (misleading or deceptive conduct) and the Consumer Guarantees Act 1993 (guarantees around consumer products and services).
An advisory agreement won’t magically make you compliant, but it can:
- set a standard for accuracy and substantiation
- clarify approval processes (e.g. you approve all public claims)
- limit the advisor’s authority to speak on behalf of the business
This is particularly relevant if the advisor is well-known in the industry and might post about your business publicly.
Privacy And Data Handling
If an advisor is accessing:
- customer contact lists
- CRM notes
- analytics dashboards linked to identifiable people
- staff records
…your agreement should clearly restrict how that information is used and disclosed.
This supports good practice under the Privacy Act 2020 - and it’s also just sensible risk management. If you’re sharing any personal information, make sure access is genuinely necessary and appropriately controlled.
Can You Use A Template Advisory Agreement (Or Should It Be Custom)?
It’s tempting to grab a free template online and get it signed quickly. We get it - you’re busy, and it feels like “just a simple arrangement”.
But advisory agreements are one of those documents where templates often miss the exact issues that matter in practice, like:
- equity details that match your cap table and shareholder rules
- how vesting should work in a real-world breakup
- IP ownership where the advisor has existing materials or frameworks
- conflict management for advisors with multiple clients
- limitations on authority (so they can’t accidentally bind your business)
Even small wording differences can change outcomes. For example, “we agree you can have 1%” is not the same as setting out how and when that 1% is earned, what happens if you raise capital, and what happens if the relationship ends early.
As a general rule: if the advisor has access to sensitive information, is receiving any form of reward, or is helping build something valuable, it’s worth getting the agreement properly drafted or reviewed so it actually protects you.
If you’re also setting up the business entity at the same time, it can help to make sure your internal governance documents (like your Company Constitution) and your external agreements aren’t working against each other.
Key Takeaways
- An advisory agreement sets clear expectations about what your advisor will do, how they’ll be rewarded, and how sensitive information and IP will be handled.
- You’ll usually want an advisory agreement whenever an advisor has access to confidential information, influences strategy, provides ongoing support, or is receiving payment or equity.
- Strong advisory agreements typically cover scope, confidentiality, IP ownership, conflicts of interest, fees/equity (including vesting if relevant), and clear termination terms.
- Be careful not to accidentally treat an “advisor” like an employee - misclassification can create real legal risk if the working relationship looks like employment in practice.
- If your advisor helps shape your branding, product, or materials, make sure IP ownership is clearly documented (often with an IP assignment mechanism) so your business can grow, raise capital, or sell cleanly.
- Templates can be risky for advisory arrangements because small details (especially around equity, IP, and conflicts) can have big consequences later.
If you’d like help putting an advisory agreement in place (or reviewing what you’ve already agreed), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
