Free Directors Service Contract Generator

Use the form below to generate a free directors service contract that your company can use to put its relationship with its directors on a formal footing. If you are a director, you can also use this agreement to put in place the contractual arrangement pursuant to which you can, for example, pay yourself via the company.

Create your Free Directors Service Contract

Fill in the form below to have a free customised Directors Service Contract emailed to you in Word format. No credit card, sign-up or subscription needed.

Enter the full legal name of the company.

Enter the full legal name of the individual being appointed as director.

Enter the registration number as recorded in Companies House.

Enter the full postal address of the company’s registered office.

Enter the full postal address of the director.

Enter the official job title that will be assigned to this person, this might just be "Director".

Select the date when the director will officially start working.

Enter the primary address where the director will be working. Where fully remote, state fully remote. The contract provides that where part-time remote working is permitted, the company will communicate this to the director separately.

Enter the gross pay amount before taxes and other deductions. You will specify the period via the next question. The £ sign is automatically included, but specify any commas or decimal points needed. E.g. 15.49 or 35,000.

£

Indicate the pay period (e.g. per hour, day, week, month or year). E.g. £20 per hour, or £45,000 per year.

Specify how the director is paid by completing the below. Suggested text is given.

“The Company shall pay the Director…”

Is the director eligible for a bonus?

An example clause that you can amend is included below.

Specify the duration of the probation period during which employment/appointment terms can be reassessed or the director can be more easily fired. The contract provides that if the director has been employed for less than one month they can be dismissed immediately, and if longer than one month they get one week's notice. Include the number and the period.

After the probation period has been passed, enter the length of notice required for either the employer or director to terminate the employment and the directorship.

Specify the number of working days the director is entitled to take as holiday each year, excluding public holidays. The clause contains language to deal with pro-rating this amount for part-time director so if the standard for full time directors is 25 days, you can write 25 days here for part-time directors too. For full time workers, the legal minimum is 20.

days

We recommend you select "yes" and include the pre-drafted clause that imposes a 3 month non-compete on the director.

Enter the special terms you wish to include below. These are added as a schedule to the document and override the terms of the main agreement. Alternatively, just generate the agreement with the below, and then modify the drafting in the Word version that will be emailed to you.

Examples could include non-compete provisions (example text provided below), or any specific additional benefits that you want to add to the contract (e.g. a company car).

Enter the email address you want us to send your contract to. This may take a couple of minutes to arrive.

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Guide to Directors Service Contracts

When establishing or managing a business, understanding the legal frameworks that govern the roles within your company is crucial. One such framework is the Director’s Service Contract, a specialized agreement that defines the relationship between a director and the company they serve. This guide provides a comprehensive examination of the Director’s Service Contract, offering clarity on its distinction from standard employment contracts and highlighting its importance, particularly in the context of startups. Whether you’re at the helm of a burgeoning enterprise or steering a well-established corporation, equipping yourself with this knowledge will ensure that both the company’s and directors’ interests are protected and advanced efficiently.

What is a Directors Service Contract

A Directors Service Contract is essentially an agreement that outlines the terms of engagement between a company and its director(s). Unlike ordinary employees, directors hold fiduciary responsibilities, and hence, the contract covers aspects like duties, rights, and obligations that are unique to a director’s role. This contract serves as a binding document ensuring that both parties are clear about their roles and responsibilities, including details about remuneration, confidentiality, and the term of the directorship. It is an essential tool to formalize the relationship within the governance structure of the company. Moreover, this contract can safeguard the interests of the organization by stipulating conditions for termination and other administrative formalities. Tailored specifically to the nature of directorship, this contract often addresses issues such as conflict of interest and expectations regarding corporate opportunities.

Directors Service Contracts vs Employment Contracts

While both Directors Service Contracts and employment contracts establish terms of engagement, they serve different purposes and contain fundamentally distinct provisions. An employment contract is primarily designed for staff members and focuses on standard employment terms such as working hours, annual leave, and sick leave. In contrast, a Director’s Service Contract deals with governance and strategic management responsibilities that are unique to the role of a director. It includes specifics such as decision-making authorities, corporate governance practices, and the director’s strategic duties to the company. Furthermore, while employment contracts may incorporate relatively straightforward remuneration packages, Director’s Service Contracts often involve more complex compensation structures, including bonuses, share options, and other forms of performance-related pay aligned with the company’s success.

Why a Director Should be Employed Using a Directors Service Contract

Employing a director under a Directors Service Contract is beneficial for both the director and the company. For the director, it provides a clear framework of their role and responsibilities, helping to align expectations and minimize disputes related to their duties. For the company, it ensures compliance with corporate governance standards, which is crucial for maintaining trust and accountability within the corporate structure. A well-drafted Directors Service Contract can also play a significant role in attracting high-caliber candidates, as it reflects the organization’s professionalism and commitment to good governance. Additionally, these contracts often include non-competition and confidentiality clauses that protect the company’s interests by preventing directors from misusing sensitive information or engaging in activities that could harm the company.

Is a Director An Employee

The status of a director as an employee can vary depending on the circumstances and the specific terms of the Directors Service Contract. In many cases, directors are considered senior officers of the company rather than traditional employees. This distinction is important for statutory and tax implications. Directors, especially non-executive ones, might not fulfill the usual employee criteria, such as receiving a regular salary or working set hours. However, if a director is also engaged in roles that meet the employment criteria under the Employment Rights Act 1996, they could indeed be classified as an employee, making them eligible for additional employment rights and benefits. It is crucial for companies to clearly define the nature of their relationship with directors to avoid ambiguities and ensure proper legal and financial compliance.

Finalizing and Signing: What You Need to Know

Finalizing and signing a Directors Service Contract requires careful attention to detail. The contract should be comprehensive and tailor-made to reflect the specific duties and responsibilities of the director within the company. Both parties should thoroughly review the terms, potentially with legal advice, to ensure mutual understanding and agreement. Attention must be paid to specific clauses regarding disputes, termination, and confidentiality to avoid future legal complications. The signing of this contract should be formally minuted by the company’s board of directors and properly stored as part of the company’s official records. It is also advisable to regularly review and update the contract to reflect any changes in company law, directors’ roles, or corporate strategies.

Directors Service Contracts and Startups

For startups, a Directors Service Contract is vital for establishing a firm governance foundation. In the early stages of a business, clear directorial roles and responsibilities help in steering the company towards growth while maintaining legal and ethical standards. These contracts help delineate the boundaries between management and board-level decisions, crucial for startups where roles can often be fluid. They also reassure investors about the company’s governance standards, which can be pivotal in securing funding. For startup directors, these contracts can provide stability and clarity, outlining their involvement and remuneration, which might be tied closely to the performance and milestones of the startup.

Director’s Contracts FAQs

Q: How often should a Director’s Service Contract be updated?
A: It should be reviewed annually or whenever significant changes occur in the company or the director’s responsibilities.

Q: Can a director be terminated without a breach of contract?
A: Yes, the contract allows for termination with notice, and provided that the company follows the correct procedures as outlined in the contract and the law.

Q: Are there standard clauses that should be included in every Director’s Service Contract?
A: Yes, standard clauses include duties and responsibilities, compensation, confidentiality, conflict of interest, and termination terms.

Q: Does a Director’s Service Contract need to be approved by shareholders?
A: Typically, it does not require shareholder approval but should be approved by the Board of Directors.

In conclusion, a Director’s Service Contract is a fundamental document that not only delineates the framework within which directors operate but also fortifies the company’s governance structure. For businesses in England and Wales, understanding the nuances of these contracts and how they differ from standard employment contracts can significantly impact corporate compliance and management efficiency. Whether you are establishing a new company or looking to optimize an existing one, ensuring that your directors are employed under well-structured and legally sound contracts is crucial. This guide aims to assist in navigating these waters, ensuring your company remains robust in its governance and clear in its directorial roles and responsibilities.

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