Business Pre-Nup?

I own a marketing company, and am looking at bringing in a senior person to help.  I want the business if things do not go well. Is there anything like a “business pre-nup” I can put in place?

A “business pre-nup” usually consists of a number of documents. The new arrival’s employment contract must contain key protections: restrictive covenants, and confidentiality, garden leave and payment in lieu of notice clauses.

Any bonus scheme should require the individual to be in employment and not under notice, given or received, on the payment date to receive a bonus. Ensure any shareholding is kept well below the level at which shareholder resolutions can be blocked, usually 25%.

Specify what happens when the employment ends e.g. shares should be sold back, the price depending on the reasons for departure: par value for a bad leaver, fair value for a good leaver. Share options should be forfeited by a bad leaver, but might be retained by a good leaver.

Even if shares or share options are retained, they should be forfeited if the individual competes after he departs. If the new arrival is to be a director, change the company’s articles of association to permit the majority shareholder(s) to remove him. Retaining a majority on the board, or at least a chairman’s casting vote if numbers are equal is also essential. Dealing with all these areas in advance will avoid problems later.