Plan governs: Overview, definition, and example

What is plan governs?

Plan governs is a common clause used in equity, compensation, and benefits agreements to clarify that the formal plan document takes precedence over any summaries, offer letters, or related agreements. If there’s any conflict or inconsistency between documents, the official plan controls the outcome.

Why is plan governs important?

This clause helps prevent confusion and disputes by establishing a clear hierarchy of documents. Employees or contractors often receive summaries or verbal explanations that simplify the details, but the plan governs clause ensures that the legally binding terms are those in the full plan. It also protects companies from unintended promises or drafting errors in secondary documents.

Understanding plan governs through an example

Suppose an offer letter says an employee’s stock options vest monthly, but the official equity plan says they vest quarterly. If there’s a plan governs clause, the quarterly vesting schedule in the official plan document will apply—even if the employee expected otherwise based on the offer letter.

Example of a plan governs clause

Here’s how a plan governs clause may appear in a contract:

"In the event of any conflict between the terms of this Agreement and the Equity Incentive Plan, the terms of the Plan shall govern and control."

Conclusion

The plan governs clause keeps everyone aligned on which document contains the final, enforceable terms—usually the full plan itself. It reduces the risk of misunderstandings and makes sure benefits or equity are administered according to a consistent, central set of rules. Businesses should include this clause in all equity and benefit-related agreements.

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This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.