Both companies and directors benefit from having a clear director service contract concluded. Not only does this reduce risks but it clarifies issues from the outset in the right way. Our lawyers provide an experienced and cost effective drafting service.
Directors may or may not be employees. Where the director is an employee, it is important to recognise the need to comply with employment law in addition to company law and what is agreed in the contract.
Also important to remember is the fact that whilst a director and perhaps your company, prefer that the director is self employed, this may not be the way the contractual relationship is interpreted under employment law. The “label” attached to a contract is not conclusive – it is the reality of the relationship which determines whether the director is in fact an employee or self employed.
As your business grows you are likely to employ different types of staff with different skills and levels of seniority. This in turn means that a standard employment contract for all staff is unlikely to be satisfactory or to cover you legally.
Below are some of the usual clauses which are found in director or executive contracts :-
– which may require the director to work hours that are required instead of set hours of work.
– and additional benefits such as healthcare.
– what happens if the director becomes seriously ill.
– what will constitute reasons for dismissal? Issues here can be supplementary to those a standard employment contract might include. For example, misfeasance or bankruptcy or defined reputational issues are likely to be included. It is also key that the director will be contractually obliged to resign as a company director at Companies House quickly after termination for specified reasons.
– a carefully drafted confidentiality clause is key as a director will be privy to the most sensitive corporate information.
– the director service contract should prevent the director from attempting to take clients or know how directly to a competitor or attempt to poach other staff.
– making it clear that intellectual property is the property of the company not the director.
– directors are increasingly seeking an indemnity and possibly insurance cover, at the company’s expense, to mitigate against risks such as Bribery & Corruption. There can be instances where whilst a director may be legally liable, he or she may have had no involvement or knowledge of the wrongdoing.
– executive directors generally have day to day control of the company and work full-time whereas non-executives are often part-time and used by larger businesses for oversight. They may only spend a few days a month on company business.
Please get in touch to discuss how we can help with preparation of a director service contract or director employment contract for a senior employee.