Director Service Agreement Template (UK)

Record the appointment; do not purport to make it

This template opens with a recital that the director was appointed under the articles with effect from a stated date, and that the agreement records the terms of service. The company must still notify Companies House of the appointment within 14 days using form AP01, and keep its own register of directors up to date — this document is not a substitute for either.

Be honest about removal

Section 168 of the Companies Act 2006 lets a company remove a director by ordinary resolution before the expiry of their period of office, notwithstanding anything in any agreement between the company and the director — and section 168(5) is clear that removal under the section does not deprive the director of any compensation or damages payable in respect of the termination of their appointment.

This template states the intended term honestly, confirms it does not limit the members' statutory removal power, and separately sets out what the director is paid to the date service ends — the compensation position section 168(5) preserves, rather than a fixed-term promise the statute can override in any event.

Do not draft an indemnity that is void

Section 232(1) of the Companies Act 2006 makes void any provision that purports to exempt a director from liability for negligence, default, breach of duty or breach of trust in relation to the company, and section 232(2) voids company indemnities against such liability except those permitted by sections 233 (insurance), 234 (a qualifying third-party indemnity provision) and 235 (a qualifying pension scheme indemnity provision). An unqualified 'indemnify to the fullest extent permitted' clause, copied from a US template, does not survive contact with this rule.

This template's indemnity is drafted as a qualifying third-party indemnity provision, which is what the Act actually permits, with the associated disclosure duty and the register or public statement of its existence that the Act requires.

Commit to D&O insurance including run-off

Directors' and officers' policies are written on a claims-made basis, so a claim brought after a director leaves may fall outside the policy in force at that later date. This template requires the company to maintain cover throughout service and to maintain run-off cover for a stated number of years afterwards — commonly six for a private company — with a right to see the policy summary and to be told of cancellation or material change.

Give the statutory duties their proper names

The Companies Act 2006 codifies the general duties of directors: to act within powers, to promote the success of the company, to exercise independent judgement, to exercise reasonable care, skill and diligence, to avoid conflicts of interest, not to accept benefits from third parties, and to declare an interest in a proposed transaction. A conflicts clause that says only 'disclose and abstain' misses the distinct rule for a proposed transaction under section 177 as against an existing one under section 182, and misses that the board can authorise a conflict under section 175(4)(b) and (5) rather than simply requiring recusal.

This template uses the Act's own structure: a disclosure and authorisation procedure for conflicts, an interests schedule updated as circumstances change, and a confidentiality clause that expressly preserves the director's right to make a protected disclosure about wrongdoing.

Quantify the time commitment and the pay

This template records the expected number of board and committee meetings a year, an estimated total time commitment, and — for a non-executive — that the role is one of oversight rather than day-to-day management. On pay, it records the fee, any equity award and its vesting, and the expense policy, and notes that fees to a non-executive are normally paid through PAYE where the director is an office-holder for tax purposes, which is the point many small companies get wrong by treating non-executive fees as a self-employed invoice.

Clause-by-clause guide

Recital of appointment

Records that the appointment was made under the articles and this agreement sets the terms of service only, with the Companies House filing noted separately.

Role and duties

The statutory general duties under sections 171–177 of the Companies Act 2006, stated by their proper names.

Term and removal

The intended term, stated without overriding the members' section 168 power to remove the director by ordinary resolution.

Time commitment

Expected meetings per year and the estimated total commitment.

Fees and expenses

The fee, any equity award, expense policy and the PAYE position for a non-executive's fees.

Conflicts and interests

Disclosure of a proposed transaction under section 177, authorisation by the board under section 175(4)(b), and the interests schedule.

Confidentiality

Protects non-public information while preserving the director's right to make a protected disclosure.

Indemnity

A qualifying third-party indemnity provision under section 234, drafted to the conditions the Act actually permits.

D&O insurance and run-off

Cover during service plus run-off for a stated period afterwards.

Independent advice

The right to take independent professional advice at the company's expense in appropriate circumstances.

Resignation and return of property

Notice of resignation, return of board papers, and updating the register of directors and any filing.

UK compliance checklist

Board service sits on top of the Companies Act 2006, the articles and Companies House filing obligations.

• Notify Companies House within 14 days

  A change in directorship — appointment or termination — must be notified to Companies House within 14 days, using form AP01 for an appointment and TM01 for a termination.

  Companies Act 2006, section 167

• Do not draft around the removal power

  Members may remove a director by ordinary resolution before their term expires, notwithstanding any agreement, and removal does not deprive the director of any compensation or damages otherwise payable.

  Companies Act 2006, section 168

• Do not promise an indemnity the Act voids

  Any provision exempting a director from liability for negligence, default, breach of duty or breach of trust is void, and a company indemnity against such liability is void except as a qualifying third-party indemnity provision, a qualifying pension scheme indemnity provision, or insurance.

  Companies Act 2006, section 232

• Follow the correct conflicts procedure

  Declare an interest in a proposed transaction under section 177 before it is entered into, and rely on board authorisation under section 175(4)(b) and (5) for an ongoing conflict rather than simple recusal.

• Keep the register of directors current

  The company must keep its own register of directors and a register of directors' residential addresses, separately from the Companies House filing.

• Get the tax treatment of fees right

  Fees paid to a director as an office-holder are generally taxed through PAYE, not treated as self-employed income invoiced by the director — a common error for a newly appointed non-executive.

How to complete the director service agreement

1. Confirm the appointment first. Pass the resolution appointing the director, file form AP01 with Companies House within 14 days, and update the register of directors.
2. Enter the term and time commitment. Add the start date, intended term, and the expected number of board and committee meetings.
3. Set the fees. Add the annual fee, any equity award, and confirm fees will be paid through PAYE.
4. Attach the interests schedule. List other directorships and interests, and the conflicts procedure to be followed.
5. Confirm the indemnity and insurance. Set the qualifying third-party indemnity terms and the D&O policy limit and run-off period.
6. Sign. Both parties sign, and the company keeps the agreement with its corporate records.

Frequently asked questions

Related templates

• Articles of Association Template (UK)
• Board Resignation Letter Template (UK)