Key Person Clause

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Home Startup Terms Glossary Key Person Clause

What is a Key Person Clause?

A key person clause refers to the portion of a contract that forbids investment firms or managers from making new investments without the consent of an individual called a key person. This key person is an employee or partner who is essential to day-to-day investment activities that are involved in the operation of the startup.

Examples of a Key Person Clause:

  • Example 1. A key person clause exists to put all investing on hold in the event that a key member passes, quits, or spends too much time on other projects.
  • Example 2. A key person clause requires that a suitable replacement for a key person is found before investment activity resumes.
  • Example 3. In the event that a suitable replacement cannot be found, startups may be forced to close their doors.

Check out this article about the concept of a key person clause.

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