Directors’ service contracts (UK)

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Updated: Aug 20, 2021

Companies must keep (in an appropriate place) details of service contracts with directors. If the contract was in writing, a copy of it must be kept. If not, a memorandum will suffice. The appropriate place is the registered office, the place where the register of members is kept, or the principal place of business. The place where it is kept must be notified to the Registrar of Companies for inclusion in the register of companies; it must be open to inspection on every business day for at least two hours. free of charge to all members of the company. There are certain limited exceptions in the cases of directors working wholly outside the United Kingdom, and of contracts for very short periods.

The Companies Act 1985 reaffirms a provision first introduced in the Companies Act 1980 prohibiting service contracts with directors exceeding a period of five years where such contracts cannot be terminated at will by the company or where they can only be terminated in specific circumstances. The object is to prevent directors abusing their position by arranging long service contracts which would provide substantial compensation for loss of office on the company being taken over or substantially reorganized. Contracts entered into before the Act came into force are protected.

Reference: The Penguin Business Dictionary, 3rd edt.


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