Director Service Agreements

Director service agreements are specialized employment contracts that address the unique position of company directors.

Director vs Standard Employee

Key Differences

Aspect	Director	Employee
Statutory duties	Fiduciary duties to company	Basic employment duties
Removal	Shareholder vote	Dismissal process
Personal liability	Greater exposure	Limited
Notice periods	Typically longer	Standard
Restrictive covenants	More extensive	May be limited
Benefits	Often enhanced	Standard

Essential Clauses

Appointment and Office

"The Company appoints you as [Executive Director / Managing Director / Finance Director] with effect from [date]. You agree to serve as a director of the Company and such group companies as may be required. Your appointment as a director is subject to the Company's articles of association and the Companies Act 2006."

Duties of Directors

"In addition to your contractual duties, as a director you have statutory duties under the Companies Act 2006, including:

• Acting within your powers
• Promoting the success of the company
• Exercising independent judgment
• Exercising reasonable care, skill, and diligence
• Avoiding conflicts of interest
• Not accepting benefits from third parties
• Declaring interests in transactions"

Board Participation

"You shall attend board meetings and, if appointed, committee meetings as required. You shall participate constructively in board discussions and decision-making."

Notice Periods

Longer Notice

Directors typically have longer notice periods:

"Either party may terminate this agreement by giving not less than [6/12] months' written notice. The Company may, at its discretion, terminate your employment immediately by making a payment in lieu of notice."

Companies Act Limit

Under s.188 Companies Act 2006:

• Guaranteed employment terms over 2 years require shareholder approval
• "Golden parachute" provisions may be void without approval

"Nothing in this agreement shall provide for guaranteed employment exceeding 2 years unless approved by shareholders in general meeting."

Removal from Office

Shareholder Rights

"Nothing in this agreement shall affect the Company's right (acting through its shareholders) to remove you from office as a director in accordance with the Companies Act 2006. Such removal shall not of itself terminate this agreement."

Consequences of Removal

"If you are removed from office as a director:

• Your employment may be terminated with notice (or PILON)
• You shall not be entitled to compensation for loss of office beyond contractual notice
• Outstanding equity awards will be treated in accordance with scheme rules"

Restrictive Covenants

Enhanced Restrictions

Directors typically have stronger restrictions:

"For a period of [12] months after termination, you shall not:

• Solicit customers with whom you had material dealings in the final [12] months
• Solicit employees who reported to you or with whom you worked closely
• Compete with the Company's business within [the UK / defined territory]
• Be involved in any competing business"

Knowledge and Influence

Restrictions may be more extensive due to:

• Greater access to confidential information
• Relationships with key customers
• Strategic knowledge
• Influence over employees

Compensation and Benefits

Enhanced Package

Directors often receive:

"In addition to basic salary, you are entitled to:

• Performance bonus up to [X]% of salary
• Long-term incentive plan participation
• Pension contributions of [X]%
• Private medical insurance (family)
• Life assurance at [X]x salary
• Company car / car allowance
• Directors' and officers' insurance"

Share Schemes

"You will be invited to participate in the Company's share schemes, subject to scheme rules and any shareholder approvals required."

Conflicts of Interest

Disclosure Obligations

"You must declare any direct or indirect interest in any transaction or arrangement with the Company. You must inform the Company of any situation that may give rise to a conflict of interest."

Other Directorships

"You may not hold any other directorship or material business interest without prior written consent of the Board. Consent may be refused if the position creates a conflict of interest."

Indemnity and Insurance

D&O Insurance

"The Company shall maintain directors' and officers' liability insurance at appropriate levels throughout your appointment and for [6] years thereafter."

Indemnity

"The Company shall indemnify you to the fullest extent permitted by law against any liability incurred in connection with your duties as a director, subject to the Company's articles of association."

Termination Provisions

Summary Dismissal

"The Company may terminate your employment immediately without notice if you:

• Commit gross misconduct
• Are disqualified from acting as a director
• Become bankrupt or make an arrangement with creditors
• Are convicted of a criminal offense affecting your position
• Become of unsound mind"

Resignation from Office

"On termination, howsoever arising, you shall:

• Immediately resign from all offices and directorships with the Company and group companies
• Execute any documents required to effect such resignations
• You hereby irrevocably appoint the Company Secretary as your attorney to sign such documents if you fail to do so"

Fiduciary Duties Post-Termination

Continuing Obligations

Some duties continue after termination:

• Confidentiality (ongoing)
• Not to misuse confidential information
• Return of company property

"Your duties of confidentiality continue indefinitely after termination. You acknowledge that information obtained as a director remains confidential regardless of how your employment ends."

Board Minutes and Access

Access to Records

"You are entitled to access board minutes and papers. On termination, you shall return all such materials and shall not retain copies."

Shareholding Requirements

If Applicable

"You are required to hold a minimum of [X] shares in the Company within [12] months of appointment. These shares must be retained throughout your directorship."