A Director’s Service Contract is a specific type of employment contract for company directors, usually executive directors who are involved in the day-to-day running of the business. It sets out their rights, responsibilities, and obligations, and it often includes more detailed provisions than a standard employment contract due to the strategic and fiduciary duties directors hold.
Below are the essential components typically found in a Director’s Service Contract:
• Name of the company and the director.
• Title and description of duties.
• Clarifies executive vs. non-executive role.
• Specifies whether it includes a board appointment or any subsidiary roles.
• Commencement date.
• Fixed term, rolling, or indefinite arrangement.
• Compliance with the Companies Act and fiduciary duties.
• Duty to promote the success of the company.
• Non-delegation and expected standards of conduct.
• Base salary.
• Bonus structure and performance incentives.
• Stock options, profit-sharing, and long-term incentive plans (LTIPs).
• Pension contributions.
• Company car, expenses, insurance, etc.
Holiday and Leave Entitlement
• Paid time off.
• Sickness, parental, and compassionate leave.
• Obligation to protect company secrets during and after employment.
• Ensures the company owns all IP created in the course of employment.
• Notice periods for resignation or dismissal.
• Termination with or without cause.
• Garden leave provisions.
Post-termination clauses such as:
• Non-compete
• Non-solicitation of clients or staff
• Non-dealing (not doing business with former clients)
• Obligations under company law.
• Indemnity for actions taken in good faith as a director.
• Clauses requiring formal approval for certain actions or benefits (e.g., bonuses, share options).
• May refer to internal company policies.
• Specifies which country’s law governs the contract.