An investor in a company will be concerned to ensure that the key employees of the target company, including the founder(s), are employed under suitable employment contracts.  If they are not already engaged under appropriate employment agreements, the investment transaction may well involve the founder(s) or other key employee(s) of the target company entering into new employment agreements with the company at closing of the transaction.

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 What matters will an investor want covered in employment agreements as part of an investment transaction?

The new employment agreements that an investor will require will usually contain clauses dealing especially with the following matters:

  • employment role and responsibilities
  • employment term and notice periods to terminate employment
  • salary and other benefits
  • restrictions on other activities whilst employed by the company
  • ownership by the company of intellectual property created during the course of employment
  • restrictive covenants applicable on termination of employment
  • payment in lieu of notice and gardening leave clauses
  • circumstances in which the company may serve terminate employment with immediate effect

This sub-section of our investing in a company section includes appropriate forms of employment agreement for senior and junior employees.

As an alternative to being employed by the company, an individual may provide their services to the company on a consultancy basis under a consultancy agreement.  In addition, the investor may also provide consultancy services to the company.  The consultancy agreement may be between the company and the individual or between the company and a personal service company owned by the individual.

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