Directors Service Contracts

Directors Service Contracts

Directors have certain rights and responsibilities arising as an employee, as well as a director, of a company.

A Director’s Service Agreement should include the following information:

  • Appointment commencement date, employment commencement date (as this may differ), and notice required by either party to terminate the agreement;
  • Duties of the director, including any provisions under which a director may be required to serve on the boards of companies within a group of companies;
  • Reference to the statutory duties of directors contained in the Companies Act 2006;
  • Requirement for the director to comply with various company policies including, but not limited to, the company’s anti-bribery and corruption policy;
  • A right for the company to monitor the director’s email and other communications carried out on company equipment;
  • Limitations on the director engaging in business or professional activities outside the employment, and the method of obtaining prior approval if such activity might be acceptable to the company;
  • Remuneration details: salary, bonus schemes, share options, medical insurance, life and disability insurance, pensions, company car and/or other benefits including sufficient flexibility for the company to review, amend or withdraw the benefit in appropriate circumstances;
  • Details of reimbursement and authorisation for expenses;
  • Location of the director’s main place of work, arrangements relating to any future change of location on a permanent or temporary basis and details relating to the requirement to travel for business;
  • Holiday entitlements;
  • Entitlements relating to pay during periods of absence due to sickness or accidents;
  • The right for the company to require the director to undergo a reasonable medical examination and for the reports from such examinations to be disclosed to and discussed with the company;
  • Provisions concerning disclosure of company information which is considered confidential;
  • Provisions relating to intellectual property issues;
  • Circumstances under which the service agreement may be terminated by the company without notice;
  • Where the grievance, disciplinary and appeals procedures may be found (the procedures themselves normally being non-contractual);
  • Details of any constraints that may apply to the director on leaving the company including working for a competing organisation, setting up in competition to the company, soliciting or dealing with company clients and its senior members of staff;
  • Other provisions relating to the termination of the employment, including the right for the company to give pay in lieu of notice and/or to place the director on garden-leave and the return of company property;
  • Requirement for the director to remove company client/customer details from their social media sites (such as LinkedIn) and to disclose any relevant social media site passwords;
  • Specification of which law governs the agreement (e.g. the law of England);
  • Evidence that the agreement has been approved by the board.

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