The appointment of a director is normally either by an ordinary resolution of the shareholders of the company or by a resolution of the board. The latter is normally subject to a ratification of the appointment by shareholders at the next Annual General Meeting (AGM).
All appointments of directors must be recorded by Companies House to ensure that members of the public can discover the identity of the directors of any particular company. The appropriate form must be lodged at Companies House currently within 14 days of the appointment.
Directors who are employees of the company have Contracts of Employment, often labelled as Service Agreements. The terms and conditions of such agreements will normally reflect the senior status of the individual in relation to other employees. In the same way as for other employees, minimum terms and conditions on a Statutory Written Statement of the Main terms and Conditions of Employment may be provided but the Service Agreement should be tailored to the particular requirements of the business in question.
Company directors often have other outside interests and Service agreements can seek to limit other shareholdings in competing businesses.
The terms offered to a director under a Service Agreement must be approved by the existing board of directors unless the power is delegated to one of the individual senior directors.
The level of payment of the directors is governed by the Articles of Association of the business as amended by any resolutions passed at board meetings. Shareholders must be allowed to inspect any Service Agreements which must be kept at the company’s registered office or another alternative permitted location. The copies should be retained for at least 12 months after they have been terminated.
If the employment of a director is terminated, it is not automatically the case that he or she will lose their directorship. It is therefore important to ensure that adequate provision is contained within either the Service Agreement and/or the Articles of Association to ensure that individuals, who are no longer required by the business, can be removed both as directors and employees.