Board

These include clauses concerning hours and place of work, salary, holiday entitlement, etc.

Provisions could specify whether a director will be entitled to share options, bonus payments based on performance targets, medical insurance or expenses, life and disability insurance or pension options.

It is important to identify an executive director’s duties, role and limits on authority to avoid future disputes or complications regarding a director’s position and responsibilities. The position of director has various accompanying fiduciary duties that are implied by an executive director's service agreement or a non-executive director’s letter of appointment. There are further duties and general principals set out under the Companies Act that apply to directors. We would recommend that any service agreement also include more precise and defined duties and responsibilities to reinforce implied terms and statutory responsibilities and mitigate ambiguities.

A service agreement should clarify whether a director is permitted to work with other companies and if any restrictions apply to this entitlement, for example, a non-compete clause preventing the director from working with the company’s competitors. It would be desirable to have a specific procedure for seeking approval from the company or company shareholders, and the particular grounds on which approval may be refused.

The notice period on which employment can be terminated is an essential provision of every employment contract. A balance must be reached allowing both the company sufficient time to find a new director while at the same time allowing a director to be released within a reasonable period to take up a new position or pursue their choices. The appropriate length of notice will greatly depend on individual circumstances but is ordinarily between 6 and 12 months for senior directors. Our solicitors can advise on the best options for you or your company shareholders and represent your best interests in any negotiations.

The service agreement should specify the process of resignation/termination as both an employee and a director, as well as possible grounds for termination, most commonly including fraud and gross misconduct.

Restrictive covenants should be included in a service agreement to restrict a former director’s actions and possible future business projects upon departure from the company and their position as director. Restrictive covenants enable a company to protect itself against unfair competition and the potential authorised use or disclosure of sensitive and confidential information, effectively safeguarding a company’s relationships with its key customers and employees.