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Directors are important to every company structure. Their decisions can determine the direction of the company, therefore it’s important that they are well aware of their expectations and general responsibilities.
Ideally, a company should have a Director’s Service Agreement drafted as soon as they appoint a new director.
You may have heard of a standard Service Agreement, but a Director’s Service Agreement is more specific to the director and the obligations they owe to the company and its performance overall.
What Does A Director’s Service Agreement Include?
A Director’s Service Agreement will include important information regarding the directors’ relationship and duties towards the company. It will detail matters such as the authority the director possesses, their salary, termination rights, confidentiality and intellectual property. The agreement is not limited and can include anything considered important by the company.
This Agreement can vary depending on the company and the nature of its activities, so it’s worth chatting to a lawyer to ensure you’ve covered all key matters in writing.
Am I Legally Required To Have A Director’s Service Agreement?
There is no legal requirement to have a Director’s Service Agreement. However, it is highly recommended.
A good way to understand how it works is to view it as an Employment Contract for a director, regardless of whether they are employed contractually or as an internal employee. It is a document to govern their conduct.
As mentioned above, ther service agreement will outline crucial matters regarding the director’s role in the company. The agreement ensures the director and relevant members of the company are all on the same page regarding their expectations of the director. It also means you can hold them accountable for their actions as the company director.
| Example Jasmine has been appointed as the director at Hot Choc Inc. During her induction, she signed a directors service agreement among many other documents. At a major conference for ‘cold weather drinks’, Jasmine bumps into the CEO of Chai Lattes, Ali. The two went to University together and were rather well acquainted. Ali asks Jasmine if it was a product or a technique in manufacturing that made their hot chocolate so creamy. Jasmine knew she was not able to give out the names of specific ingredients or the technology they used, however she was unsure if she could answer Ali’s general question. Telling Ali she’d get back to him, Jasmine went to check her Directors Service Agreement. Upon consulting the contract, she found it was against the confidentiality clause to even disclose that much information to Ali. Jasmine calls Ali and lets him know that she cannot divulge that information without putting her job at risk. |
If you’re looking to appoint a director, talk to us about our package today. We’ll draft a Director’s Service Agreement for use by your business.
Our Director’s Service Agreement package includes:
- Drafting a Director’s Service Agreement in accordance with the requirements of your business
- Phone consultations (up to 60 minutes) with a Sprintlaw lawyer who will take your instructions, advise you on the legal issues you need to know and answer your questions about the document
- 1 complimentary amendment to the final draft we provide you, as long as you request the amendment within 10 business days of us delivering the final draft
Please note that this package does not include specific advice about whether the director will be considered an employee or contractor for employment law or tax purposes, and advice regarding the employer’s obligations under any applicable employment laws.
Next Steps
Reach out to us about the package if you’d like to draft a directors service agreement or want more information – we’re here to help!
If you would like a consultation on your options going forward, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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