Executive Service Agreements Solicitors

Executive directors hold significant responsibility in supporting the wider strategy of a business and steering it towards success. Individuals in this role typically have access to confidential business information such as company finances, commercial contracts, customer and supplier information and intellectual property. With so much resting on the shoulders of a company director, it is vital that you ensure they have the best interests of the business in mind and that you are adequately covered in the event that they act in breach of their duties.

It is fundamental for any business to ensure that the rights and duties of all directors are specified correctly and agreed upon within a legally binding document. The best way to ensure that you are acting in compliance with current employment legislation is to entrust an employment law specialist to draft an executive service agreement.

Here at Analysis Legal we have the experience and expertise to ensure that any directors’ service agreements within your business are comprehensively drafted. We will ensure that the document addresses the key issues and the accompanying responsibilities and duties associated with the role of a director, tailored specifically to your company. To find out more about how we can help you to clearly define the expectations of a director within your company, please contact us and our team will be happy to help.

What is a Director’s Service Agreement?

A director’s service agreement, also known as an executive service agreement, is an employment contract that goes beyond the requirements of an ordinary employment contract. This type of contract covers, where relevant, basic employment law requirements together with a myriad of issues relating specifically to directorial roles. Consequently, when appointing new directors and/or where an employee progresses to a higher level of seniority, it is advisable that service agreements are in place to reflect their new liabilities and entitlements – please see below for further information on this point.

An executive service agreement can also be signed by an individual who holds a non-executive director role; hence this type of agreement is not necessarily linked to the employment of the individual.

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We provide tailored advice for executive service agreements, which considers you and your specific requirements.

Communication

We talk you through both the progress and the next steps of your execitive service agreement without legal jargon.

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Analysis Legal LLP have years of experience in drafting directors' contracts, having achieved the status of a leading firm in the Legal 500 directory since 2016.

What is a Director?

In order to fully understand the purpose of a directors’ service agreement, it is important to know what the term “director” means under UK employment law. The Companies Act 2006 defines the term “director” as any individual who occupies the position of director “by whatever name called”. As such, they may be known as:

Executive Directors – usually a higher tier directorship level holding more managerial responsibility within the company.
Non-Executive Directors – usually external agents who assist with policy and decision making and are appointed by the shareholders of the company.
De Facto Directors – Act as directors despite not being formally appointed to the role.
Shadow Directors – Typically make decisions behind the scenes and may issue instructions for the other directors to follow.

These distinctions are particularly important when considering how to draft service agreements, as well as when handling situations such as dismissal or resignation. Importantly, both shadow and de facto directors can be held liable for non-compliance to their statutory duties, even in the absence of a formal executive service agreement.

Our expert team has a great deal of experience in drafting executive service agreements across a wide variety of different business scenarios, so please don’t hesitate to contact us for more information.

Once again Analysis Legal LLP is a leading firm in the Legal 500 directory, which states ‘Andrea Paxton is a go-to for senior executive departures and hires, as well as redundancy, TUPE and IR35 advice’.

What Laws Apply to Directors?

There are several areas of law which may affect company directors. However, the primary piece of legislation which affects directors and their involvement in a company is the Companies Act 2006, which sets out the following seven general duties to be followed by all company directors:

To act within their powers
To promote the success of the company
To exercise independent judgement
To exercise reasonable care, diligence, and skill
To avoid any conflicts of interest
Not to accept benefits from third parties
To declare any interests in a proposed arrangement or transaction.

It is a requirement for all companies to have a memorandum and articles of association, and the directors of the company must ensure that they also act in compliance with these constitutional documents. In cases where directors are also shareholders, which is often the case in SMEs and start-ups, they should also ensure compliance with any shareholders’ agreement, as well as ensuring they manage any potential conflicts of interest.

Is an Executive Service Agreement Necessary?

There is currently no legal requirement to have an executive service agreement in place. However, it is strongly advisable to do so in order to regulate the relationship between the director and the employer, as well as providing protection to both parties. For example, company directors typically have access to a wide range of valuable business information, and the shareholders, stakeholders, and any other directors of the company will want to ensure that all directors are acting in the best interests of the company and are not abusing their position for their own gain. An executive service agreement can clearly lay out what is expected of the director so there can be no misunderstanding of their duties and responsibilities.

Additionally, in instances where shareholders are looking to sell their shares or seek funding for the company, any purchaser or investor will likely expect the company to have entered into an executive service agreement with each of its directors as a means of protecting their purchase or investment, and as a sign of good management within the company.

Why is an Executive Service Agreement Important?

It is advisable to have a directors’ service agreement in place in order to protect your business as it will outline the duties, rules, and reciprocal obligations which govern and underpin the relationship between the company and the director. When both parties accept the terms laid out in the agreement, they enter into a legally binding contract. Such agreements typically cover the following:

Basic Provisions: this includes clauses relating to hours and place of work, salary, sick pay, holiday entitlement, etc.
Bonus or Reward Schemes: this could specify the director’s entitlement to share options, performance-based bonus payments, medical insurance and/or expenses, life insurance, and pension options.
Defined Duties: it is vital that the duties, role, and limits on authority of the director are clearly defined in order to avoid future disputes or complications.
External Appointments: it should be stated in the service agreement whether a director is permitted to work with other companies, and whether any restrictions apply, for example a non-compete clause.
Notice Period: the agreement should clearly state the notice period required terminating the employment contract, providing the company with sufficient time to find a new director, whilst allowing the existing director to be released within a reasonable time frame.
Termination and Resignation: the executive service agreement should specify the process to be followed in the event of a resignation or termination, as well as stating the possible grounds for termination.
Restrictive Covenants and Confidentiality: the inclusion of restrictive covenants in a service agreement restricts a former director’s actions and future business projects, enabling the company to safeguard itself.

If you are looking for help in establishing an effective agreement with the directors of your company, it is advisable to seek assistance from an experienced employment law solicitor.

At Analysis Legal we have the knowledge, expertise, and diligence to ensure that we draft an executive service agreement which is both compliant with the law and tailored to the exact needs of your business. To find out more about the services we offer, please don’t hesitate to contact us and a member of our team will be happy to help.

Contact our Executive Service Agreement Solicitors

Analysis Legal is a specialist employment law firm, with decades of experience. We have supported many directors and executive through the drafting and enforcement of executive service agreements, as well as many other matter of employment law for employers.

We help clients across Manchester and the North West of England, such as Sheffield, Liverpool and Leeds, from our offices in Stockport, delivering excellent results and client care. We can assist you wherever you are in England and Wales.

Our team of Employment Law Solicitors in Manchester provides expert legal advice, avoiding legal jargon and keeping you updated on the process of your case at every step. When possible, we offer fixed-fee services for employment law cases as part of our commitment to a transparent and client-focused process.

We tailor our services to you and your business based on your values, needs, and requirements, while providing up-to-date legal advice on all aspects of employment law for employers.

Our priority is to understand your business and serve its objectives, so it can grow in a safe, future-proof manner. For advice related to executive service agreements, contact our team at Analysis Legal today, and experience the level of professionalism and client care that consistently sees us awarded by the Legal 500.