Director's Service Agreement UK: Executive Director Contract Template

Holding office as a director and being employed by the company are two separate relationships. The office comes from the Companies Act 2006 and the articles: appointment by the board or the shareholders, the general duties, the filings at Companies House. Employment comes from a contract, and it is the contract that gives the director a salary, holiday, sick pay and the protection of employment law. A director's service agreement joins the two. It confirms the executive role (managing director, finance director, chief technology officer), says that the person also holds office as a director, and sets the terms on which both can come to an end.

The difference from a standard employment contract shows up at the edges. A service agreement deals with resignation from office on termination, conflicts of interest under the statutory duties, insurance and indemnity, and the shareholder approvals the Act imposes on long contracts and on payments for loss of office. It is also wider than a non-executive letter of appointment, which covers a part-time board seat without employment. For staff below board level, our UK employment contract templates for other staff are the better fit.

Employment law comes first. Under section 1 of the Employment Rights Act 1996 the director must receive a written statement of particulars no later than the first day of work, covering pay, hours, holidays, sick pay, pension, notice and the disciplinary note required by section 3. A well-drafted service agreement contains every particular, and ours summarises them in a schedule; a stand-alone statement of written particulars is only needed where there is no full contract. Section 86 sets the minimum notice the company must give, which rises with length of service and can never be cut by contract.

Company law adds controls an ordinary contract never meets. Under section 188 of the Companies Act 2006, any provision giving the director a guaranteed term of more than two years needs prior approval by resolution of the members; the text of section 188 on legislation.gov.uk explains how a memorandum of the proposed contract must be circulated with a written resolution or made available at the registered office for at least 15 days before a meeting. Without approval the provision is void to the extent of the contravention, and the company can end the contract on reasonable notice (section 189). Section 228 obliges the company to keep a copy at its registered office until at least one year after the contract ends, and section 229 lets any member inspect it free of charge. Sections 215 to 222 require member approval for payments for loss of office, with exceptions under sections 220 and 221 for good faith payments under an existing legal obligation, damages, settlements, pensions for past service and small payments.

Working time is the last piece: regulation 20 of the Working Time Regulations 1998 can take a managing executive with autonomous decision-taking powers outside the 48-hour limit. Two changes under the Employment Rights Act 2025 also matter: statutory sick pay has been payable from the first day of sickness absence since 6 April 2026, and the unfair dismissal qualifying period is six months where the effective date of termination falls on or after 1 January 2027.

The classic trigger is incorporation. A founder sets up a company, takes office as director and starts drawing a salary through payroll without anything in writing. That breaches section 1 from the first day and leaves both sides guessing about notice, ownership of the code the founder writes, and what happens if co-founders fall out. An external hire at board level is just as common: a managing director recruited from outside expects a negotiated contract, and the investors expect restrictions and a garden leave clause.

Promotion raises a different issue. A sales manager who joins the board keeps continuous employment from the original start date, and the new agreement should say so, otherwise statutory notice gets miscalculated later. Investment rounds are a frequent edge case: a term sheet often makes up-to-date service agreements for the founders a condition of completion, alongside amended articles and the other company records you will find in our catalogue of UK legal templates. Long contracts are the trickiest. A founder who asks for thirty months' notice is asking for a guaranteed term of more than two years, and the shareholders must approve it before the company signs, even when the founder is also the majority shareholder.

The opening clauses fix the appointment: job title, start date, the date continuous employment began, an indefinite term or a fixed term that the company can still end by notice, the right to work, and a warranty that the director is not disqualified and has verified, or will verify, identity with Companies House. The duties clause restates the general duties in sections 171 to 177 in plain terms, requires conflicts to be authorised by the directors under section 175 (or by the members where there is only one director), and asks the director to declare interests under sections 177 and 182. Outside interests the board accepts can be listed.

Pay and benefits follow, with a few choices worth flagging:

• Salary includes any director's fees and is reviewed every year, while the deduction clause gives the prior written consent that section 13 of the 1996 Act requires.
• A bonus can be discretionary, contractual against targets, or excluded; the discretionary version obliges the board to act in good faith and rationally.
• Automatic enrolment becomes optional for a director employed by the company under regulation 5EA of the 2010 enrolment regulations, so the form offers the company scheme, contributions to the director's own scheme, or none.
• Holiday must reach 5.6 weeks a year.

Termination is where the template earns its keep. It provides notice both ways, a payment in lieu of notice at the company's option, garden leave, summary dismissal for gross misconduct, disqualification or bankruptcy, and an obligation to resign from office, backed, if you choose that signing option, by a power of attorney given as a deed. Intellectual property, confidentiality and insurance or a qualifying third party indemnity (section 234) complete the package. Restrictions cover non-compete, non-dealing and non-solicitation, with periods you choose; our restrictive covenants agreement explains how courts test them.

You start with the company: its exact registered name, company number and registered office, all taken from the Companies House register. A number beginning with SC or NI tells you the template is the wrong one, because Scottish and Northern Irish companies sit outside it. The director's details come next, then the body that approved the terms (the board in most cases, the shareholders where the director is the only director) and the date of that decision.

From there the form moves through the employment itself: the start date and, for a director who already worked for the group, the earlier date on which continuous employment began. You choose an indefinite or fixed term and the notice each side gives, then answer the section 188 question; if the company's notice exceeds two years, the form asks for the date of the members' resolution. Hours, working time, pay and benefits follow. If your articles are old or heavily amended, check what they say about directors' conflicts and board decisions, or replace them with our articles of association template.

The last steps cover restrictions, insurance, indemnity and signing. Clause numbers adjust automatically when a section drops out.

The most expensive mistake is a long notice period nobody approved. Owners of small companies often give themselves two or three years' notice, sign the contract at a board meeting, and only discover in a later dispute that the provision is void under section 189. The same companies tend to forget the inspection rule, so the contract sits in a drawer at the director's home rather than at the registered office. A third mistake is writing restrictions far wider than the business: a twenty-four month non-compete covering the whole of the UK for a director who sold software to retailers in Yorkshire is unlikely to survive a challenge. Courts refuse to enforce a restriction that goes further than the legitimate interest it protects; they may delete offending words, but they will not rewrite the clause for you.

Payments on exit cause the next wave of problems. A board that agrees a generous ex gratia payment for a departing director, outside anything the contract provides, needs member approval under section 217 unless an exception applies, and an unapproved payment is held on trust for the company. Relying on the regulation 20 exemption without real autonomy over working hours is another trap, because the exemption depends on the facts rather than the label. Finally, a director's service agreement in the UK governs employment, not tax: the mix of salary and dividends needs accountancy advice.