Director's Service Agreement

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What is it?

Director's Service Agreement is an employment contract or service agreement suitable for a director of a company. A director has certain rights and obligations as an employee and additional rights or obligations that arise as a director of the company.

Director's Service Agreement lays out key information about the director's work, including important areas such as remuneration, benefits, hours, holiday, sickness, termination, and confidentiality. It gives the company and the director contractual responsibilities and allows either side to take legal action if the other side breaches the agreement.

Why do you need it?

The appointment of a director is of critical importance to any business. It is vital to have a comprehensive service agreement in place that sets out the conditions of the director's employment and that can protect both parties by providing a reference document if there are any disputes. If you are a director and a shareholder of the company at the same time, you still need a Director's Service Agreement because your role as a director is distinct from your role as a shareholder and you have different rights and obligations towards the company in each role. 

Key clauses to watch for:

When drafting a Director's Service Agreement, it is important to focus on a number of key clauses, in particular:

  • Director's remuneration and any benefits the director is entitled to;
  • How the company's confidential information will be protected;
  • How the company's intellectual property will be protected;
  • Director's duties;
  • Circumstances that warrant termination of the Director's Service Agreement;
  • What restrictions will be imposed on the director after resignation or termination;
  • References to statutory duties applicable to the director; and
  • Whether the director is prohibited from engaging in business or professional activities outside the employment and methods of obtaining prior approval if such activity might be acceptable to the company.

Director's Service Agreement Document

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