Letter Appointing Associate Director
This Letter - Appointment of Associate Director should be used to appoint anyone (usually an employee) who it is proposed will be an Associate Director.
The office of Associate Director is often used by companies to give an incentive to key employees by recognising their importance within a company. It is a role of implied seniority but is not a legally recognised term. An associate director is therefore not a director within the meaning of the Companies Act 2006. A person so described, who is not a member of the board, will have no responsibilities as a director and should not give third parties the impression that he/she is a member of the board. Companies should therefore exercise caution as under section 40 of the Companies Act 2006, persons who claim to be statutory directors of a company (but are not) can make binding commitments on the company when dealing with third parties who are acting in good faith.
The position of Associate Director should therefore only be given to trustworthy employees who are not likely to enter the company into unwarranted commitments or contracts. An undertaking in this respect is required from the Associate Director in order to protect the company.
Remuneration may be paid from time to time in respect of the services of the Associate Director, but there is no right or entitlement to this additional remuneration.
This Letter sets out the terms of the appointment which includes the following:
- the appointee will not be a statutory Director;
- his/her appointment will not be recorded at Companies House;
- he/she will not be treated as a director under the Companies Act 2006 and the company’s articles of association;
- the appointee may be removed at any time from the office of Associate Director;
- the appointee has no rights to attend board meetings of Directors; and
- the board has the right to vary the duties of Associate Directors.
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