clause dressing: How to attract and retain talent

Startups are born in an environment of uncertainty, there are many challenges that need to be overcome, and certainly a team made up of committed and capable people can be the difference for the success of the business. It is known that Startups commonly operate in bootstrapped[1]. As labor legislation has not evolved at the same speed as the economy (more collaborative and dynamic), it is necessary to think of alternatives to attract and retain talents that help the company achieve the expected results.

The clause of dressing emerges as one of the alternatives for startups with few resources available to attract talented employees, with decisive potential to boost business growth.

For those unfamiliar with the term, dressing it is the possibility of a partner acquiring, in the future, a shareholding in the company, based on conditions and results that will be agreed between him and the company. In short, the founder foresees that, at some point in time, the partner will be able to become his partner in the business, or, at least, enjoy the benefits that this condition provides.

When creating this type of document, there are some provisions that, for the security of the business, the entrepreneur cannot give up.

Cliff

Cliff This is the grace period, the probationary period. It is an alternative for the employee to contribute to the growth of the business and for the partners to assess whether he or she is capable of joining the corporate structure.

The period of Cliff can be extinguished by time or goals. To give an example, this clause may state that the employee needs to work at the startup for two years, after this period, to be able to exercise their right. Another possibility is to set goals for the partner, which could be sales, company growth, among others.

But how to choose which model is most suitable? It all depends on the business model and what, at that moment, is important for the startup. Another relevant factor that must be considered is the profile of the professional you want to retain in the company.

Participation limit

It is important to evaluate several factors before defining the limit that will be available for acquisition. The entrepreneur must be careful because, depending on the corporate type, in addition to the equity rights linked to the acquisition, the professional may also receive the powers granted to partners, such as voting rights.

Another relevant point is the percentage of the business that is strategically interesting to make available for this type of contract. The entrepreneur must bear in mind that, eventually, he will need to use this type of contract again. Furthermore, dilution of shareholding is an extremely important issue for maintaining corporate and decision-making control of the company.

Remembering that investors, before injecting resources, make a careful analysis of who the company's partners are, which gives greater relevance when deciding who will be invited to acquire a stake in the business.

Market

From the beginning, it is important to define the value for which the quotas/shares will be acquired. As a rule, the defined value is lower than the market value, to enable the acquisition and so that the employee has actually gained, considering that during the period of Cliff, it contributes to the appreciation of the business.

In this type of contract, the acquisition of quotas/shares must not be free of charge, that is, without charging a monetary value. This is because, under our labor legislation, if the professional receives participation without having to pay, the value of the quotas/shares can be interpreted as consideration for the service provided and, therefore, incorporated into the salary, obliging the startup to pay all labor rights, such as vacation, 13th salary, among others.

Maximum term for the clause dressing

After the period of Cliff, the employee may acquire equity interest within the limit established between the parties. It turns out that, for various reasons, he may choose not to exercise the right granted to him in the contract. To provide security to the company, a maximum period can be set for it to acquire a stake and, after this period, it will no longer be able to do so.

Termination of the contract

Like any contractual relationship, it will also be important to foresee situations in which the contract may be terminated. These may be situations related to the employee, such as conduct, performance, or strategic issues related to changes in shareholding control, changes to the company's corporate purpose, among others.

It is also worth saying that the dressing It is an atypical contract, that is, it does not have a form provided for by law. Thus, to be valid, it is enough to be in accordance with the general rule of contracts (lawful and possible object, capable party, etc.), with the possibility of being provided for in a specific contract or in a clause in the memorandum of understanding.[2].

Fortress it can be an ally to boost the company's growth, however, if the clauses that regulate it are not constructed appropriately, it can end up becoming a source of risk for the development of the business, given the possibility of, for example, be mischaracterized and labor legislation is applied to the relationship between company and employee and as a result, the entrepreneur is forced to bear unforeseen burdens.

The hypothesis described above is not far from practice and, as an example, we cite a recent case[3] faced by the 23rd Labor Court of São Paulo in which the complainant alleged that there was a relationship of subordination between him and a partner of the company, and therefore sought to have the employment relationship recognized. The judge, when analyzing the memorandum of understanding signed between the parties, with a wearing, recognized the employee's membership status. In addition to the MOU, the judge also argued that, on social media, the author of the demand presented himself as if he were a partner, which gave even more strength to the recognition of the status of partner, the author of the action and, mainly, the clause dressing.

O dressing It adds value to the business, as it appears as a less expensive tool for companies and can provide progressive growth and the development of new professionals. With this, companies can invest in new talents without having to divert resources, which could be directed to product/service development, to attract strategic partners. O dressing It also appears as a way to enable investors to enter the company, contributing even more to the company's growth.

[1] Bootstrapping: English terms used to characterize companies that have few financial resources.

[2] Memorandum of Understanding (MOU): Prior contract established between parties, with the aim of formalizing some important premises, even before the final contract is drawn up.

[3] Process no.: RTOrd 1000856-03.2017.5.02.0023 – 23rd Labor Court of SP

By Bruno Nassar