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As a company director, there will be high expectations on you. These should be clearly set out in your director’s service agreement, so it is vital that you fully understand the terms you are agreeing to, including all of your rights and obligations.
At Clarkson Wright & Jakes, our Employment team regularly advise senior employees on a whole range of issues, including directors’ service agreements.
We will carefully review an agreement you have been asked to sign or that you are currently working under, explaining all of the terms in plain English. Where we believe there may be grounds for concern or room to negotiate better terms, we can support you in raising the issue in a constructive way that protects your business relationships.
Looking for more information? Please take a look at our directors’ service agreements FAQs.
To discuss how our experts can help you, please contact us on 01689 887887 or fill in our enquiry form.
Our employment experts can assist with…
- Service agreements for executive directors
- Letters of appointment for non-executive directors
- Reviewing the terms of directors’ service agreements
- Advising on directors’ rights under a service agreement
- Disputes over directors’ service agreements
Our employment law expertise
Our Employment team advise Senior Executives and other high level employees on a wide range of matters, including directors’ service agreements. We are based in Orpington and work with clients in London, Kent and across the South East.
We can also assist employers with drafting directors’ service agreements.
We are ranked for Employment Law by leading legal directories Chambers & Partners and the Legal 500. Additionally, members of our Employment law team have had their expertise independently recognised in the following ways:
- Membership of the Employment Lawyers Association (ELA)
- Associate membership and affiliate memberships of the Chartered Institute of Personnel and Development
- Associate to Watch in leading legal directory, Chambers & Partners
Our fees
Our pricing reflects the high level expertise and value we deliver for clients. We can provide a clear cost estimate at the outset, with no hidden fees or charges.
Where requested, we may be able to act on a fixed fee basis for initial advice. We can also represent you on an hourly rate basis.
Directors’ service agreements FAQs
Does a director need a service contract?
Where a director is an employee of a company (i.e. an executive director), they must be given a written statement covering at least the basic terms of their employment within two months of starting their role. These basic terms will include details such as their pay, hours and holiday entitlements.
A directors’ service agreement should also set out more detail about the director’s rights and obligations and clearly define the role and the company’s expectations of the director.
A non-executive director, who will not be an employee of the company, will normally be given a letter of appointment, rather than a service agreement.
Do non-executive directors have service contracts?
As stated above, non-executive directors will not normally sign service agreements, but rather enter into letters of appointment. These can be used to define their role and protect a company against any risks around confidential information and intellectual property.
If you are asked to enter into a letter of appointment, it is important to be very clear that this means you are not an employee of the company and thus do not have the same rights as an employee. It is sensible to take expert legal advice before agreeing to the terms to minimise the risk of future disputes.
What should be in a director’s service agreement?
The exact terms that should be included in a director’s service agreement will need to be tailored to the organisation and your role. However, general points you can expect a service agreement to cover include:
- Your duties and responsibilities – The expectations being placed upon you around decision making, including the requirement to always act in the company’s best interests and act in accordance with good corporate governance.
- Confidential information protection – Governing the sharing and protection of sensitive business information, such as client lists and intellectual property.
- Restrictive covenants or post termination restrictions – Setting out any limitations on what you can do after leaving the company, these may include seeking to prevent you working for a competitor encouraging other employees to leave or “poaching” clients.
- Any terms that may apply on termination of employment: – Detailing the required notice, each party’s obligations and how you would be treated upon leaving the business including any form of exit payment that may be made.
Do company directors have to sign non-compete clauses?
It is very common for a director’s service agreement to include a non-compete clause. This will typically state that they cannot work for a competitor or set up a rival business for a certain period of time after leaving the business.
If you have been asked to sign a non-compete clause, this is one of the things it is particularly important to have an employment lawyer review for you. You need to be confident that the clause is proportionate and will not unduly restrict your options when you leave the business.
Should a director’s service agreement contain a change of control clause?
Change of control clauses can be included in a director’s service agreement to specify that they would be entitled to an enhanced severance package if the company were taken over or entered into a merger.
The intention behind a change of control clause was to provide security for directors who needed to exit a business during a change of control, however, they are rarely used now. This is because directors’ service agreements tend to include long notice periods, which are generally considered to provide sufficient security in the event of a takeover or merger.
Speak to our employment experts in Orpington, Kent
If you need advice before signing a directors’ service agreement, are looking for help understanding your rights or need to raise a concern, please contact our Employment team on 01689 887887.