The differences between shareholders, executive directors and non-executive directors can be confusing. Our focus here is largely on executive directors, hereafter referred to as directors.
Shareholders own companies via share capital. Directors are employees of the company (normally) in very senior roles. In SMEs, the shareholders and directors are often the same people. Sometimes a director may be allocated shares within the business, but this may be a minority stake.
Director’s service agreements are similar to employment contracts. Many of the provisions within the two legal documents may be similar. Usually, both documents will oblige the individual to comply with the policies and procedures outlined in the company staff handbook.
However, director’s service agreements typically contain a number of provisions that are specific to senior individuals. For example, the company may wish to restrict a resigning director from setting up a competing business or approaching the company’s existing clients for a period of time following the director’s resignation.
In addition, where a director has also been allocated shares, the company may wish to ensure that certain conditions attach to those shares, for example, when and to whom the shares can be sold and/or what value the shares are worth depending on how the director leaves the company.
You might be thinking you don’t need an agreement because;
But what if……………?
Our Approach to Directors Service Agreements
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