There is often confusion amongst the proprietors of owner/managed businesses between their role as a shareholder and their role as a director. I am often asked to insert provisions into a Shareholders’ Agreement which should really be documented in a Director’s Service Agreement. Directors are responsible for running the company and their authority should be clearly defined. A Director’s Service Agreement is really an employment agreement which deals with the Director’s duties to the company.
A Director’s Service Agreement is important because it:
- creates certainty for the director and the company;
- can place specific obligations of confidentiality upon the director;
- can provide protection for both the director and the company by, for example, inserting non-compete, compensation etc provisions;
- may serve as an example of a well organised business to potential investors.
Working with Accountants
I work closely with accountants where their clients wish to put in place a Director’s Service Agreement.
So, if you have a client who wants to put in place such an agreement, feel free to contact Richard Jenkins on 024 7698 0613 or Richard@clariclegal.co.uk for further advice or assistance.