The Companies Act 2006 received Royal Assent on 8 November 2006 and fully came into force in October 2009.
The Companies Act 2006 introduced some significant changes to the law relating to Directors' Service Contracts. Under the 2006 Act shareholder approval is required for directors' service contracts whose term is, or may be, longer than 2 years (rather than 5 years as under the 1985 Act). Service contract for these purposes includes consultancy as well as employment arrangements involving directors, and also includes non-executive directors' letters of appointment.
The 2006 Act provides greater detail on the procedure for obtaining approval, which includes a requirement for a memorandum setting out the proposed contract to be available before and at the relevant shareholder meeting.
Since shareholders must approve all directors’ service contracts that are for two years or longer, this Ordinary Resolution - Approval of Directors’ Service Contracts template shall be used where the term in the service contract proposed to be entered into between the company and the director is, or may be, longer than two years.
Please note that approval is not required by the members of a company which is either a non UK registered company or a wholly-owned subsidiary.
The Companies Act 2006 introduced other changes in relation to Directors’ Service Contracts. The 2006 Act requires that a written service contract or written memorandum of terms must exist, clearly stating the services and duties of all the directors of the company. In addition the 2006 Act places a requirement on companies to keep available for inspection free of charge a copy of every director's service contract or, if the contract is not in writing, a written memorandum setting out its terms. The obligation applies regardless of the duration of the contract. Under the 2006 Act, copies of service contracts must be kept at the company's registered office. In addition to the right to inspect service contracts at the company's registered office, the 2006 Act gives shareholders a right to request a copy of a director's service contract (or memorandum of its terms) upon payment of a fee. A copy must be provided within 7 days of the company receiving the request.
For a Director’s Service Contract please see Employment Contract - Directors Service Contract.
This Ordinary Resolution - Approval of Directors’ Service Contracts is in Microsoft Word format, written in plain English, easy to use and edit.
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