Section 188(5) Memorandum to Approve Director’s Long Term Service Contract

Under section 188 of the Companies Act 2006, directors’ service contracts with a guaranteed term which is (or maybe) longer than 2 years must be approved by an ordinary resolution of the shareholders of the company. A resolution under section 188 must not be passed unless a memorandum setting out the proposed contract incorporating the term is made available to members (s.188(5)).

In the case of a written resolution, the memorandum must be sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to them. In the case of a resolution at a meeting, the memorandum must be made available for inspection by the members both at the company’s registered office for not less than 15 days ending with the date of the meeting and at the meeting itself. Most private companies will opt to pass the resolution by written resolution.

Section 188(5) is not prescriptive as to the level of detail that the memo must contain in relation to the proposed contract. However, certain key provisions such as commencement of employment, term, main duties, pay and other benefits may be included.

The document is in open format. Fields should be completed where indicated. Wording in square brackets is optional and can be deleted or retained according to requirements.

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