What legal documents do I need for on-boarding employees and directors to my start-up?

November 08, 2016

Links from this article: Some general points to cover include: These documents can include: Small Business Law Library

As your startup grows, you will find yourself needing to hire more and more people. If you’re bringing employees onto your team it’s important to have a solid employment agreement ready to go, with clearly outlined expectations in relation to work responsibilities and long-term goals. It is equally important to know how to welcome and train new board members. This will make the process of on-boarding go far more smoothly, saving you a substantial amount of time and money.Director On-BoardingExpanding your board of directors requires preparation and careful thought. Directors are often brought in on the basis of being complementary to the company—he or she has a skill set or resources that are useful to and advantageous for the startup. This can be attractive to both parties, but the company should also inform the incoming directors of the duties and legal responsibilities associated with being a board director. Some general points to cover include:

  • Directors are legally liable for and have a fiduciary duty to the company
  • Directors have a duty of care to the company, and as such are required to supervise and manage its affairs such that, if done wrong or omitted, can leave them liable
  • Directors do have options when it comes to protecting against liability, like obtaining insurance
  • Payment terms, if there are any, including how directors are to be compensated (e.g., cash, options, or a mixture of both)

Perhaps a subtler point, but one that should still be made known to an incoming director, is that in smaller startups, shareholders are often far more involved in the business through the use of a unanimous shareholders’ agreement. This can replace the board of directors to some extent, restricting their powers but at the same time reducing some of their responsibility for liability.In any event, while welcoming incoming board members, the company should also impress upon them that directing the company is a responsibility that should be treated with great thought and care. Employee On-BoardingOn-boarding is popularly discussed in terms of building a friendly and supportive work environment for a new employee to make the transition easier so they can reach peak productivity faster. That’s definitely something that should be done. However, another side of on-boarding involves making sure employees have the appropriate employment documents to make the terms of their employment very clear. These documents can include:

  • A comprehensive offer letter that provides details related to payment terms and benefits
  • A non-disclosure agreement, otherwise known as a confidentiality agreement
  • A rundown of federal and provincial employment policies that outline the company’s rights and liabilities in relation to the employee’s
  • An Employment Handbook or Manual, which serves a dual purpose—to inform the employee of further offer terms such as time off, but also to explain work culture and work towards workplace integration

To see a standard employment agreement, visit our Small Business Law Library!

Employment Agreement
Human Resources