The Companies Act 2006 requires a director to have a written service contract with their company.
Whether a contract is in fact verbal or in writing, the company must keep a written note of its terms, or a copy of the written contract to be available for inspection by shareholders at its registered office. There is a further requirement that shareholder approval is required if a contact is for a term exceeding two years.
Many small companies overlook the requirements for a service contract. However, if there is a dispute with HMRC, the company or the shareholders or the company gets into financial difficulty or if there are issues concerning a director then either the affected party may find that they regret that a service contract was not in place.
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Directors' service contracts - top tips
Don't get caught out by a service contract that is actually an employment contract and don't get caught out by inadequate agreements between office holder and company.
