One of the key success factors for an early-stage startup is the right team and especially the CEO who is leading a fast-developing company. Considering this, it is vital to make sure that the CEO agreement is done right from the beginning. Proper documents reduce extra hassle and help startups to concentrate on their core functions and creating success stories.
Castrén & Snellman Attorneys Ltd, FiBAN’s prominent partner, has created a CEO agreement template to meet the needs of FiBAN business angels and their portfolio companies. We had a chat with Sanna Alku, Counsel at Castrén & Snellman, about the importance of a CEO agreement. Read on to hear answers to the typical questions regarding the CEO agreement.
If you are a FiBAN member, use the link at the end of the article to access the CEO agreement template created by Castrén & Snellman and FiBAN.
WHO needs a CEO agreement?
Every startup that has a CEO should have a separate CEO agreement that is different from the general employment agreement template. The CEO is not subject to the Employment Contracts Act and is not considered an employee. The CEO is outside the scope of many employment laws and therefore the weight of the CEO agreement is particularly important.
WHY a startup needs a CEO agreement?
Proper documents help to ensure that the relevant parties know what is expected from them, thus creating trust and commitment. Further, typically in connection with a funding round, investors require as precondition for the investment that proper management agreements are in place.
HOW to create a good CEO agreement?
Rule number one: always have a written agreement. Verbal agreements are challenging to verify afterwards.
Contractual terms should be drafted as clear and unambiguous as possible. When drafting the agreement, you should ask yourself the following question - would an outside reader understand what the parties have intended to agree? If yes, you are on the right track.
It’s important to keep in mind that model agreements are always ‘just’ models. Each contractual situation and the parties’ needs should be assessed on a case-by-case basis. One of the most common mistakes is to use a template agreement ‘as it is’ without considering whether all the model clauses are appropriate for the intended use.
WHAT are the most typical CEO agreement clauses?
Typically a CEO agreement includes clauses for example on salary and possible other benefits, holiday entitlements, confidentiality obligation, intellectual property rights, non-competition and non-solicitation restrictions and terms regarding the termination of the CEO agreement, such as notice period and possible severance payment.
WHEN should the contract be created?
The sooner the better. With a well-drafted CEO agreement, many potential problems can be solved even before they actually arise. Once a CEO agreement is done right at the beginning, it will carry on for a long time.
But don’t worry if your portfolio company’s CEO does not yet have a CEO agreement. The agreement can be concluded at any time, also after the CEO has been appointed.
WHERE to get started and ask some help for more questions?
FiBAN members can utilize a CEO agreement template that Castrén & Snellman has created. The contract considers all the parties involved, thus bringing a good balance and a smoother way to get the legal paperwork done right at once. FiBAN members can access the CEO agreement template here (only for FiBAN members, login required).
If you are not a FiBAN member yet, and require assistance, help is available. Sanna Alku and her colleagues from Castrén & Snellman will be happy to provide expert advice services and help you out with any further questions in mind.
Castrén & Snellman was founded in the late spring of 1888. Decades of supporting our clients’ success have enabled us to grow into a firm of over 240 people. We are based in Helsinki, and in other parts of the world we work with an extensive international network of law firms. We are a trusted advisor in mergers and acquisitions, disputes and other specialised fields of business law. Our mission is to help our clients build sustainable success stories. www.castren.fi
Photos: FiBAN/Wasim Al-Nasser
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