Companies Act 2006 Directors Service Contracts

As a company director, it is important to have a comprehensive understanding of the Companies Act 2006 and how it impacts your role and responsibilities. One of the areas that can often be overlooked is the issue of directors` service contracts. Here are some key points that every director should be aware of.

What is a Directors` Service Contract?

A directors` service contract is an agreement between a company and its director. It outlines the director`s role, responsibilities, and remuneration. The contract also includes the terms and conditions of the director`s service and can cover issues such as the length of the contract, termination rights, and post-termination restrictions.

Why are Directors` Service Contracts Important?

Directors` service contracts are important because they provide clarity about the terms of a director`s appointment. They outline the expectations placed on the director, and the remuneration they will receive for their services. They also provide protection for both the company and the director in the event of any disputes or disagreements.

What are the Main Requirements of a Directors` Service Contract?

Under the Companies Act 2006, every director must have a written service contract. The contract should include the following information:

– The director`s name and position

– The date of the contract

– The length of the contract

– The director`s duties and responsibilities

– The director`s remuneration and benefits

– The notice period required for termination of the contract

– Any post-termination restrictions, such as non-compete clauses

The contract should also be made available for inspection by shareholders and must be filed with Companies House.

What Happens if a Company Doesn`t Have a Directors` Service Contract?

If a company does not have a directors` service contract in place, it can lead to confusion and disputes. Directors may not have a clear understanding of their roles and responsibilities, and there may be disagreement over their remuneration and benefits. The absence of a contract can also make it more difficult to terminate a director`s appointment if needed.

In Conclusion

Directors` service contracts are an important aspect of the relationship between a company and its directors. They provide clarity and protection for both parties and help to ensure that directors understand their roles and responsibilities. If you are a director, it is important to ensure that you have a written service contract in place that meets the requirements of the Companies Act 2006.