A non-executive director (NED) service agreement is a written contract between a company and an NED outlining the terms and conditions of their appointment. An NED is a member of a company’s board who does not hold a full-time executive role but instead provides independent oversight and guidance on matters such as strategy, risk management, and corporate governance.
The NED service agreement defines the NED’s relationship with the company, including their duties, responsibilities, and remuneration. It also outlines the length of their appointment, conditions for termination, and any confidentiality or non-disclosure agreements.
An NED’s duties may vary depending on the company’s industry, size, and structure. Typically, NEDs are expected to provide independent, objective advice and support to the board and senior management team. They may also be involved in setting the company’s strategic direction, monitoring performance, and ensuring compliance with relevant laws and regulations.
The NED service agreement should clearly set out the NED’s remuneration, which may include a fixed fee, expenses, and other benefits such as share options or pension contributions. It should also detail any performance-related bonuses or incentives, as well as any restrictions on outside activities or conflicts of interest.
Termination clauses in the NED service agreement should specify the circumstances under which the agreement can be terminated, such as breach of contract, resignation, or retirement. It should also include provisions for notice periods, payment of outstanding fees and expenses, and any restrictions on post-termination activities.
Confidentiality and non-disclosure agreements are also common in NED service agreements. These clauses ensure that the NED keeps confidential information related to the company’s business and affairs secure and does not disclose it to third parties.
In summary, a well-drafted NED service agreement is essential for both the company and the NED to ensure clarity and transparency in their relationship. It protects the interests of both parties and helps to establish clear expectations of the NED’s role and responsibilities. As more companies recognize the value of independent oversight and guidance, NED service agreements will continue to play a critical role in ensuring effective corporate governance.