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