Directors' Service Agreement Solicitors
A directors’ service agreement is the contract between a company and an executive director that sets out the director’s role, pay, benefits, notice period, duties and post-termination restrictions.
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Adam Bernard Solicitors drafts and reviews directors’ service agreements for companies appointing directors and for directors negotiating their terms.
A director wears two hats. As an officer of the company, they owe statutory duties under the Companies Act 2006. As an executive, they are usually also an employee. A directors’ service agreement brings both roles together in one document.
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Why a Directors' Service Agreement Matters
Without a written service agreement, the company and the director may disagree about pay, notice, bonuses and what the director can do after leaving, and the company may struggle to protect its confidential information and clients. A clear agreement:
- Defines the director’s responsibilities and reporting lines.
- Sets remuneration, bonus and incentive arrangements.
- Provides for notice, garden leave and payment in lieu of notice.
- Protects confidential information, intellectual property and client relationships.
- Clarifies how removal from the board interacts with employment.
Companies Act 2006 Requirements
Several Companies Act 2006 rules apply directly to directors’ service agreements.
- Long-term contracts – a guaranteed term of more than two years that the company cannot terminate by notice requires prior approval by ordinary resolution of the members under section 188.
- Inspection – the company must keep a copy or memorandum of each director’s service contract available for inspection by members under section 228.
- Payments for loss of office – certain payments to directors for loss of office require member approval under the rules beginning at section 215.
- Removal – shareholders can remove a director by ordinary resolution under section 168, but this does not deprive the director of compensation for breach of their service agreement.
Directors' Duties
Every director owes seven general statutory duties to the company, and the service agreement should reinforce them rather than repeat them loosely. The duties in Part 10, Chapter 2 of the Companies Act 2006 include acting within powers, promoting the success of the company, exercising independent judgement, exercising reasonable care, skill and diligence, avoiding conflicts of interest, not accepting benefits from third parties and declaring interests in proposed transactions.
Identity Verification at Companies House
Since 18 November 2025, new directors must verify their identity with Companies House, and existing directors must do so in line with the transition timetable. GOV.UK explains how to verify your identity for Companies House. The service agreement and appointment process should require the director to complete verification and keep it current.
Key Clauses in a Directors' Service Agreement
- Appointmentand duties – title, reporting line, time commitment and other
- Remuneration– salary, bonus, share options, pension and
- Expensesand D&O insurance – reimbursement and directors’ and officers’ liability
- Noticeperiod – often longer than for other staff, with garden leave
- Paymentin lieu of notice – to allow immediate termination without breaching the
- Confidentiality and intellectual property.
- Post-termination restrictions – non-solicitation, non-dealing and, where justified, non-compete See our non-compete clausepage.
- Resignationfrom office – an obligation to resign as director on termination.
Employment Law Changes Affecting Directors
Executive directors who are employees benefit from employment law changes in the Employment Rights Act 2025. Under the Employment Rights Act 2025, the unfair dismissal qualifying period is expected to be six months for dismissals from 1 January 2027, and the cap on the compensatory award for unfair dismissal is expected to be removed from the same date. This significantly increases potential exposure when senior executives are dismissed, so termination provisions and settlement strategies should be reviewed. For senior staff who are not directors, see our senior employee contracts page.
Non-Executive Directors
Non-executive directors normally sign a letter of appointment rather than an employment contract. It sets out time commitment, fees, independence and confidentiality without creating an employment relationship.
Directors' Service Agreement Checklist
Companies appointing an executive director should confirm six points before signing.
- Theboard and, where required, shareholders have approved the
- Theagreement is consistent with the articles and any shareholder agreement.
- Bonusand incentive terms match the rules of any share
- Notice,garden leave and PILON provisions work
- Restrictivecovenants are tailored to the director’s actual
- D&Oinsurance is in place before the appointment takes
How Adam Bernard Solicitors Can Help
- Draftingdirectors’ service agreements and non-executive appointment
- Reviewingagreements for incoming directors through our contract review service.
- Aligningservice agreements with shareholder agreements and articles of
Call 0207 100 2525 (24/7) or book a free consultation to discuss your contract.
This page is for information only and does not constitute legal advice.
Frequently Asked Questions
Does a director need a service agreement?
Can a director's service agreement be for more than two years?
Can shareholders inspect a director's service agreement?
If a director is removed from the board, does their employment end?
Do directors need to verify their identity with Companies House?
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