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Letter – Appointment of Non-Executive Director


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

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.

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.

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.

This Letter – Appointment of Non-Executive Director includes the following clauses:

  1. Length of Appointment and Notice Period
  2. Re-Election Under the Articles of Association. Clause 2 has been added to cater for companies that have Articles of Association that require the directors to retire by rotation. The wording in square brackets which reflects the company’s articles should be chosen.
  3. Termination
  4. Duties
  5. Fees
  6. Separate Consultancy Services
  7. Expenses
  8. Non-Competition
  9. Access to Information
  10. No Authority to Contractually Bind the Company Without Express Approval by the Board. Please note that this clause will be ineffective where a third party deals with the non-executive director in good faith.
  11. Review of Performance
  12. Change of Personal Details
  13. Data Protection. Clause 13 has been added so that the non-executive director has to give explicit consent to the processing of his or her personal data. Any sensitive personal data that is to be processed can be included in the field at clause 13.1.4.
  14. Exclusion of the Contracts (Rights of Third Parties) Act 1999. 
  15. Entire Agreement Clause
  16. Governing Law

 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.

This 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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