Letter – Appointment of Non-Executive Director

This is a Letter of Appointment for a Non-Executive Director of a private limited company.

Non-executive appointment as a contract for services and fee payment treatment

The appointment of a non-executive director is a contract for services and not a contract of employment.

However, HMRC increasingly expects companies to pay non-executive directors’ fees to them (as “officeholders”) under PAYE in the same way that they would be paid if it were employment income.

This template therefore has been updated to provide for payment of those fees to be made under PAYE. The template also provides that fees for additional separate consultancy services provided to a company by a non-executive director may be paid gross.

Legal responsibilities and the typical non-executive role

There is no legal distinction between executive directors and non-executive directors and a non-executive director will have the same legal responsibilities as any other director under the Companies Act 2006.

The distinction lies in the role that they perform. Non-executive directors are independent advisors or supervisors who stand back from the day-to-day running of the business; instead they scrutinise and assist the executive directors in their strategic decision-making process.

Exactly what this entails will vary from company to company, depending on what is required at each stage of a business’ development. They will usually only devote a portion of their time to the business.

Whilst non-executive directors are particularly appropriate in larger companies, in a SME or new business, a non-executive director might act as an entrepreneurial mentor, whose presence provides an experienced guiding voice.

Companies House filing and corporate governance code

A non-executive’s details will need to be filed with Companies House in the usual way on Form AP01.

A non-executive director of a private company will not have to adhere to the provisions of the UK Corporate Governance Code which is aimed at UK public listed companies.

What this letter covers

This Letter – Appointment of Non-Executive Director covers the key terms of the appointment, including:

• appointment length, notice and termination arrangements;
• duties, time commitment, fees, expenses, and separate consultancy services;
• non-competition, access to information, performance review, and updating personal details; and
• data protection provisions, including explicit consent to processing personal data and a field for any sensitive personal data to be processed.

It also states that the non-executive director has no authority to contractually bind the company without express approval by the board, but notes that this clause will be ineffective where a third party deals with the non-executive director in good faith.

Alternative document in this collection

The appointment of a non-executive director usually follows the format of this type of letter sent from the company to the non-executive director.

However, we have also included within this subfolder, a Contract for Services with all the content of this letter but within a formal contract structure.

Letter – Appointment of Non-Executive Director is part of Corporate. Just £38.50 + VAT provides unlimited downloads from Corporate for 1 year.