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Directors’ Service Contracts and Directors’ Duties

When it comes to directors’ service contracts and directors’ duties, both shareholders and the directors themselves benefit greatly from having access to ongoing, expert legal advice.  If misunderstandings and disputes can be avoided at the beginning of a director’s relationship wit

h a company and its shareholders, and the director is clear on what his or her duties are, time and money will be saved by all.

Directors’ Service Contracts

Under section 227 of the Companies Act 2006 a service contract is a contract which governs the terms and conditions under which the director undertakes to perform services (as a director or otherwise) for the company, or for a subsidiary of the company. The services performed by

the director may be made available to the company or its subsidiary by a third party, e.g. through a service company.

A directors’ service agreement should include:

  • The name of the director, the company and the commencement date of the director’s employment
  • The duties of the director and the amount of time to be spent on those duties
  • Details of the remuneration package to be paid to the director
  • Any covenants placed on the director with regards to acting for or advising other companies
  • A description on the management of expenses

At Saracens, we have been producing directors’ service contracts for many years.  We understand that these agreements need t

o be precise and tailored to the specific needs of your individual company.  As an independent advisor, we can guide and draft an agreement that will meet the expectations and the requirements of the company board exactly.

Directors’ Duties

The Companies Act 2006 codifies seven specific duties applicable to the director of a company.  They are:

  • to act within powers in accordance with the company’s constitution and to use those powers only for the purposes for which they were conferred
  • to promote the success of the company for the benefit of its members
  • to exercise independent judgement
  • to exercise reasonable care, skill and diligence when  performing their duties as a director
  • to avoid conflicts of interest
  • not to accept benefits from third parties
  • to declare an interest in a proposed transaction or arrangement

Where a board management dispute arises, we can advise on how directors should comply with the company’s articles of association and whether those directors have been acting contrary to their statutory duties under the Companies Act 2006. We can also work in collaboration with our other  litigation services to provide advice where injunctive relief may be required to minimise any harm being caused to the business by the actions of particular directors.

If you require a service contract to be drafted or need advice on directors’ duties, then please phone our London office on 020 3588 3500 or request a call back and we will be in touch.

Mr B

From the moment I instructed Saracens, to the moment I was greeted with an email confirming my property acquisition had just completed, I can safely say that the service I received was second to none. Continue Reading

March 8, 2016

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