Non-executive director's service agreement

About this non-executive director's service agreement

This is a service agreement that sets out the contract for services between a non-executive director and a company or other organisation. It should be used by any company or other organisation with a corporate structure which requires a contract with an independent non-executive director who will provide advice, balance and support.

Being non-executive, the director is not an employee of the organisation. To preserve self-employed status it is important that the service agreement, as this one does, clarifies that the work of the director is in the nature of consultancy rather than executive employment. For example, the director is required to attend meetings and “bring independent judgement to bear on relevant issues”. This non-executive director's service contract is particularly strong on the protection of confidentiality and company secrets.

The service agreement is flexible and can be used whether the term of the contract is fixed or running. Use of plain English makes editing easy and allows it to be understood by all parties.

This document provides a balance between protection for the director and for the company. If there is a difference in interests, we have favoured the company. Some of these provisions are required to comply with the law. The explanatory notes, which come with these documents, will guide you as to the importance of specific issues.

The law relating to this service agreement

This is a contract for services and wherever possible makes clear that the relationship between the director and the organisation is one of consultancy rather than employment.

The differentiation is important because as an employee, the director has greater rights and both parties are taxed differently. What matters in the judgement of whether the relationship is one of consultancy or employment is the nature of the work not the wording of the contract. However, as far as possible, this service agreement suggests the relationship is not one of employment.

When to use this director's service agreement

• Appropriate for any non-executive, part-time director of any company;
• Can also be used for charities and NGOs where the level of senior management is equivalent to the directors of a company.

Service contract features and contents

• Up to date with the latest changes in company law;
• Strong on protection of employer's confidential information;
• Structured so as to minimise the administrative burden of legal compliance.

The service agreement contains 12 provisions including:

• Appointment and fee;
• Director’s status;
• Meetings and work;
• Responsibilities as director;
• Staff handbook and company policies;
• Confidentiality;
• Procedure after termination;
• No competition;
• Data protection.