Letter Appointing Non-Executive Director

This letter is used when you want to appoint a non-executive director to your company. A non-executive director is not part of the team that is in charge of the day-to-day management of the company. A non-executive director generally has a more strategic role and is involved in policy making and planning exercises. However, non-executive directors have the same legal obligations as an executive director. This letter sets out the terms and conditions on which the non-executive director is engaged. It should not be used for an executive director who should have an employment contract.

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Step-by-step guide

Let’s walk you through how to go about drafting the Letter Appointing a Non-Executive Director, something that you need if you appoint a non-executive director to your company.

Follow these simple steps to your agreement into writing and ensure that you are adequately protected …

1. Set out the name and address of the non-executive director.

2. Insert the details of the company that the non-executive director is being appointed to.

3. You’ll then want to set out when the appointment starts, how long it is for and when it will end. This should include any reason why the company can end the non-executive director’s appointment straightaway without any notice – for those serious things that they non-executive does wrong. The company’s articles of association will also usually contain terms regarding the appointment of directors, which will apply to the non-executive director’s appointment. These should be referred to in this letter.

4. Next the letter sets out the time commitment that is expected from the non-executive director and what meetings etc they are expected to attend.

5. The letter of appointment then sets out the non-executive director’s role and duties. These include the director’s duties under the Companies Act 2006 and any other legislation that applies to directors of companies. The non-executive director has to tell the other board directors if the non-executive director has a conflict of interest in relation to anything that is being discussed by the board and, if they have a conflict in relation to any matter, they should not vote on decisions relating to that matter.

6. After this, the letter sets out what fees and expenses will be paid to the non-executive director.

7. Non-executive directors often have other interests, other than the company that they are being appointed to by this letter. The letter confirms this but says that the non-executive has to tell the chairman of the board of directors if there is any conflict of interest, whether this is an actual conflict or it may be a conflict.

8. As with any individual engaged in your business, you want to ensure that the non-executive director doesn’t disclose or use your confidential information. Make it very clear in this letter appointing the non-executive director what information can and cannot be shared…

9. Many companies have directors and officer’s liability insurance, which would cover the non-executive director. If you have D&O liability insurance, you should set this out in the letter.

10. The non-executive director will have access to confidential information about your business. In order to protect this, you should include a clause stopping the non-executive director from joining a competitor for a period of time after they leave your company. These restrictions are only enforceable to the extent that they don’t go any further than is reasonably necessary to protect the legitimate business interests of your company – its trade secrets and confidential information, business contacts and the stability of your workforce. If they do go further than is reasonably necessary to protect these interests, the clause won’t be enforceable so you need to think carefully about this clause and it must be well-drafted. If you have any questions about post-termination restrictions, please get in touch with a lawbrief who can advise you on these.

11. Just some last clauses that explain that the appointment letter contains all the terms that you’ve agreed with the non-executive director, that only the company and the non-executive director have rights under the letter, how to make changes to your agreement and that the law that applies to the letter.

12. Finally, this is where you get the option to try out fantastic e-signing feature at no extra charge and close the agreement in minutes … But remember to complete the details of the company that the non-executive director is being appointed to first.

Document drafted by:

Clive Rich LawBrief

Clive Rich is a highly experienced entertainment and digital media lawyer, who has also successfully run digital businesses for companies such as Sony and Bertelsmann.

A qualified barrister, he has been a lawyer for almost 30 years and has drafted and crafted contracts for a broad spectrum of multi-nationals, major organisations and brands, including Yahoo, Apple, Napster, SanDisk, Myspace and the BBC.

He has also previously run his own legal practice, Rich Futures Ltd in association with the Top 30 UK law firm, Olswang LLP, representing a variety of technology companies and SMEs.

Clive is a qualified Mediator through the Centre for Effective Dispute Resolution (CEDR) and a qualified Arbitrator through the Central Institute of Arbitration (CIArb) in London.

As a negotiator, he is the author of “The Yes Book: the Art of Better Negotiation”, published by Random House in March 2013. Clive has also designed and successfully launched a negotiation App called “Close My Deal”, enabling people to understand the basis of successful negotiation and apply the skills to everyday scenarios. He has provided negotiating coaching and deal making services to a wide range of large organisations and SMEs. He has also been a board member of a number of digital SMEs.

Clive is a devoted father and husband, but when he is not spending time with his family, he likes to unwind by playing golf or watching a variety of sports (football, rugby, cricket). He's a lifelong Milwall FC fan... but don't hold that against him!