Advisory Shares Explained: Legal Considerations for Startups and Founders in Australia

Building a successful startup in Australia takes more than a great idea. The right advisors can help you avoid pitfalls, open doors to capital and customers, and accelerate your growth.

But how do you attract high-calibre advisors when cash is tight? And how do you make sure the arrangement is fair, compliant, and crystal clear from day one?

That’s where advisory shares come in. In this guide, we’ll walk through what advisory shares are, how they work in practice, the key Australian legal rules that apply (including Corporations Act fundraising exemptions and how ESS/ESOP frameworks treat non-employee advisors), and the steps and documents you’ll need to set things up properly.

If you’re keen to bring experienced advisors into your startup while protecting your company and keeping things investor-ready, read on.

What Are Advisory Shares (And Why Do Startups Use Them)?

Advisory shares are an equity incentive you grant to external advisors (not employees) in exchange for their expertise, time, and networks. You’ll commonly see them used to secure support from seasoned operators who can materially move the needle-think introductions to investors, strategic planning help, or deep technical guidance.

Startups use advisory shares because they can:

• Attract top advisors when salaries or retainers aren’t feasible yet.
• Align incentives-advisors benefit when your company grows in value.
• Boost credibility with investors and customers by formalising the relationship.
• Preserve cash while still rewarding meaningful contributions.

Advisory equity is typically a small slice of the company (often 0.1%–1%, but it depends on the advisor’s seniority and involvement) that vests over time or against milestones. The grant should always be documented under a tailored contract, with vesting and performance expectations spelled out clearly.

How Do Advisory Shares Work in Practice?

Advisory shares aren’t “gifts”-they’re a structured exchange. You’re trading equity for defined services and outcomes over a specific period, typically 12–24 months.

A typical arrangement covers:

• Role and time commitment: what the advisor will actually do (meetings, intros, strategic projects), and how often.
• Equity terms: the type (ordinary shares, options, or other equity instruments), percentage or share number, and any price payable on exercise if options are used.
• Vesting: time-based vesting (for example, monthly or quarterly over 18–24 months), milestone vesting (on specific achievements), or a combination.
• Termination: what happens to vested vs unvested equity if either party ends the relationship early or expectations aren’t met.
• Confidentiality, IP and conflicts: protection of sensitive information, who owns new IP, and how conflicts of interest are handled.

Two practical tips we see help reduce disputes:

• Use a measurable cadence: monthly or quarterly check-ins make performance tracking and vesting more objective.
• Anchor the scope: define what “opening doors” or “strategic advice” actually means for your business (for example, a minimum number of targeted investor introductions or attendance at a set number of board-style sessions).

What Laws Apply To Advisory Shares in Australia?

Issuing equity-even in small amounts-is a regulated corporate and fundraising activity. At a minimum, you’ll need to consider company law, disclosure (fundraising) rules, and compliance steps tied to your company records. Here are the big-ticket items to have on your radar.

Corporations Act and Fundraising (Disclosure) Rules

Equity offers in Australia are governed by the Corporations Act 2001 (Cth). In most early-stage cases, you’ll rely on disclosure exemptions so you don’t need to prepare a full prospectus. Common exemptions under the Act include small-scale personal offers and sophisticated or professional investor pathways. For a plain-English overview of how these work, it’s worth reviewing section 708 of the Corporations Act (the main disclosure relief provisions).

Why this matters: if your advisory share offer doesn’t fit an exemption, you may trigger prospectus-level disclosure-costly and impractical for startups. Structure the offer to stay within the rules from the outset.

Company Constitution and Shareholder Approvals

Your company’s “rulebook” usually sets out how new shares are issued, whether pre-emptive rights apply, and what approvals are needed. Before you issue anything, check your Company Constitution and any existing Shareholders Agreement to understand consent thresholds, director powers, and process. Investor consent is often required, and pre-emptive rights may need to be waived.

ASIC Notifications and Record-Keeping

When you issue shares or options, you’ll need to update your share register and file the relevant ASIC forms within the required timeframes. For share issues and changes to company details, this typically involves ASIC Form 484 and robust record-keeping (including board/shareholder resolutions and updated registers). Keeping clean cap table records now will save headaches during future funding rounds or exits.

Employee Share Schemes (ESS/ESOP) and Advisors

Australia’s updated employee share scheme (ESS) rules can cover a broader group than “employees” in the everyday sense, and in some models can extend to certain contractors and advisors. Many startups use option plans to deliver equity efficiently and on a vesting schedule. If you’re leaning toward options instead of issuing shares upfront, explore whether your advisor can participate via your plan or a separate grant-structure and eligibility matter.

If you already have, or plan to create, an option plan, our Employee Share Option Plan service can help set up a compliant framework for ongoing grants to team members and (where appropriate) advisors.

Tax Considerations (For You and the Advisor)

Equity grants can create tax consequences-including income tax or capital gains tax for the advisor, and potential reporting obligations for your company. Treatment varies depending on whether you issue shares or options, the valuation and exercise price, vesting conditions, and whether any ESS concessions apply.

Because tax outcomes are highly fact-specific, get advice from a qualified accountant before you issue advisory equity. Sprintlaw focuses on legal documentation and compliance-we’ll work alongside your tax adviser to make sure the legal and tax pieces align.

Step-By-Step: Setting Up An Advisory Share Arrangement

1) Clarify the Role and Outcomes

Start with a clear scope. What do you actually want from the advisor-investor introductions, monthly strategic sessions, technical reviews, key hire referrals? Write it down and get alignment on time commitment and deliverables.

2) Choose the Right Equity Instrument

Decide whether to use shares (issued now) or options (exercisable later). Options are common for advisors because vesting is easy to structure and they help manage dilution until milestones are achieved. If you plan to use a formal plan for repeat grants, consider an Employee Share Option Plan or a streamlined option deed for advisors who are eligible to participate.

3) Select a Fair Amount (And Avoid Over-Issuing)

Market ranges vary, but many early-stage companies offer 0.1%–1% for advisory roles, adjusted for seniority and involvement. Build a vesting schedule that matches how value will be delivered-time-based vesting for ongoing support, milestone vesting for concrete introductions or outcomes, or a blend of both.

4) Protect Your Confidential Information Early

Before you share pitch decks, financials, or product strategy, put a confidentiality tool in place. A simple Non-Disclosure Agreement helps protect sensitive information while you negotiate terms and finalise the advisory arrangement.

5) Put the Arrangement in a Proper Contract

Your advisor relationship should be documented in a tailored Advisory Agreement. It should cover the role, vesting mechanics, good leaver/bad leaver outcomes, IP ownership, conflicts, and termination. If you’re issuing shares immediately, you’ll also need the appropriate board/shareholder approvals and subscription paperwork.

6) Approvals, Registers and ASIC Filings

Once approved, issue the equity, update your cap table and share register, and lodge the relevant ASIC forms (commonly Form 484) within the deadlines. Keep resolutions, consents and grant documents organised-you’ll be asked for them in due diligence during future raises.

7) Manage the Relationship and Vesting

Schedule regular check-ins and track contributions against the scope. If things change, update expectations in writing. If the arrangement isn’t working, follow your termination and vesting clauses so everyone knows where they stand.

What Business Structure Works Best?

To issue shares or options, you’ll generally need a company structure. Sole traders and partnerships don’t have share capital to grant. A company also gives you limited liability and a clearer pathway to bring on employees, investors and additional advisors.

If you’re still operating as a sole trader or partnership, now is a good time to consider company set up so you can issue equity properly and put scalable governance in place.

Key Documents You’ll Likely Need

Every startup is different, but these documents commonly underpin a clean advisory equity arrangement:

• Advisory Agreement: Sets the role, time commitment, equity grant, vesting, conflicts, confidentiality, termination and dispute resolution. A tailored Advisory Agreement is the cornerstone of the relationship.
• Shareholders Agreement: Governs how decisions are made, pre-emptive rights, drag/tag rights and approvals for new issues. Make sure your Shareholders Agreement aligns with the advisory grant and any pre-emptive rights are addressed.
• Company Constitution: Your core rules about share issues, director powers and processes. Check that your Company Constitution supports your proposed equity mechanics.
• Option Plan or Option Deed (if using options): A plan (or standalone deed) that sets consistent rules for vesting, exercise, and leaver outcomes. If you plan to grant options regularly, consider an Employee Share Option Plan that can accommodate eligible advisors and contractors.
• Confidentiality (NDA): Use a Non-Disclosure Agreement before you share sensitive information and to set expectations around confidentiality and permitted use.
• Board and Shareholder Resolutions & ASIC Filings: Approvals, updated registers, and timely filings (including Form 484) keep your cap table clean and audit-ready.

Depending on your arrangement, you might also use share subscription documents, milestone schedules as an exhibit, and IP assignment wording (either within the Advisory Agreement or as a separate schedule) so the company owns any new IP created during the engagement.

Common Risks And How To Manage Them

Advisory equity is powerful when done well-and painful when it isn’t. Here are common pitfalls and how to handle them:

• Misaligned expectations: Vague roles lead to disputes. Fix it with a scoped Advisory Agreement, measurable outcomes, and vesting tied to time and/or milestones.
• Over-dilution too early: Don’t over-issue equity in the first 12–18 months. Start conservative, then top up if the advisor outperforms.
• Disclosure and fundraising missteps: Ensure your offer fits within the section 708 exemptions and keep a record of how you’ve relied on them.
• Messy cap table and filings: Late or missing ASIC filings and registers slow down future funding. Calendar your deadlines and keep signed paperwork and registers organised.
• IP ownership gaps: If advisors create materials, code or strategy assets, your agreement should state that the company owns the resulting IP and can use it without limitation.
• Tax surprises: Shares or options can trigger tax for the advisor and reporting for the company. Get accountant advice up front and synchronise your legal docs with the tax plan.

A little structure early on goes a long way. Clear documents, clean records, and regular check-ins will keep everyone aligned and protect your raise-readiness.

Key Takeaways

• Advisory shares let you attract experienced mentors while aligning incentives and preserving cash-just make sure the scope, vesting and outcomes are clear and documented.
• Issuing equity engages company law and fundraising rules: rely on the appropriate section 708 exemptions, follow your constitution and shareholder approval processes, and lodge accurate ASIC filings.
• Use a tailored Advisory Agreement, keep your Shareholders Agreement and Company Constitution aligned, and consider an Employee Share Option Plan if you’ll grant options consistently.
• Protect your business with an early NDA, strong IP ownership clauses, and accurate cap table records (including timely ASIC Form 484 filings).
• Tax outcomes vary-coordinate with an accountant before you issue shares or options so the structure, valuation and vesting align with your tax position.
• If you haven’t incorporated yet, a company structure will make issuing equity cleaner and investor-friendly-consider company set up before you grant advisory shares.

If you would like a consultation on issuing advisory shares or setting up your startup in Australia, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.