Companies are legally required to provide directors with a service contract. In fact, it is a requirement under the Employment Rights Act 1996 for employers to provide their employees with a written statement of their main terms and conditions of employment. This must be provided within 8 weeks starting from the commencement of employment. Thus, companies are required by law to provide both directors and employees alike with a contract of employment within two months of them starting work. Furthermore, the Companies Act 2006 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. Under the Companies Act 2006 failure to provide a director’s service contract is an offence and a person guilty under this offence is liable on summary conviction to a fine.
The Companies Act 2006 also imposes on companies a duty to keep all directors' service contracts (or memoranda of their terms where the contracts are not in writing) available for inspection at the company's registered office for a period of at least one year from the date of termination or expiry of the contracts (regardless of the length of the term of the contracts or whether they are terminable within 12 months). Shareholders have the right, on payment of a fee, to request a copy of a director's service contract (or a memorandum of its terms where the contract is not in writing). The copy must be provided within seven days of the company receiving the request.
Please note that where a director is also the sole member, the company must, unless the contract is in writing, ensure that the terms of the contract are either set out in a written memorandum or recorded in the minutes of the first meeting of the directors.
Furthermore please note that under the Companies Act 2006 Directors’ Service Contracts in excess of two years must be approved by shareholders (as opposed to five years under the old Act), please see Ordinary Resolution - Approval Directors Service Contracts.
This Director’s Service Contract template can be used for any kind and size of company as it can be tailored to meet any specific need. It is fully comprehensive and it is up to date with the most recent changes in the law.
This Director’s Service Contract is to be used for executive directors i.e. company directors who are also employees of the company. It sets out the normal employment terms such as holidays, pay and pensions as well as those terms more applicable to company directors such as company cars, shareholdings and confidentiality.
This Director’s Service Contract contains the following clauses:
- Definitions and Interpretation
- Term of Appointment
- Duties of Director and Hours of Work
- Place of Work
- Remuneration, Expenses and Bonus Scheme
- Retirement, Pension and Benefits
- Absence and Sick Pay
- Maternity and Paternity Leave
- Company Car
- Confidential Information
- Intellectual Property
- Disciplinary and Grievance Procedure
- Termination and Garden Leave
- Amalgamation and Reconstruction
- Additional Policies
- Governing Law and Jurisdiction
- Previous Agreements and Contracts
- Personal Information
This Director’s Service Contract is in Microsoft Word format, written in plain English easy to use and edit.
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