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How to make a Non-executive director letter of appointment

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Set out the terms of appointment for a non-executive director (or NED) with this letter of appointment (LOA). This straightforward LOA is a great way to set out clear directorship terms and lay the foundation for a mutually rewarding relationship between company and director. Good letters of appointment cover key areas such as the director's duties, payment of fees, tax, insurance and indemnity arrangements.

Recently reviewed by Adnan Mahmood, Solicitor and Head of Legal, UK. 

This non-executive director letter of appointment was last reviewed on 18 July 2022.

Use this letter of appointment template:

  • to appoint a non-executive director
  • only for directors of UK companies

This sample letter of appointment covers:

  • the non-executive director's status
  • the non-executive director's duties
  • expected time commitment from the non-executive director
  • payment of fees and expenses
  • who is responsible for paying taxes
  • how the relationship may be ended
  • some company protections such as confidential information and restrictions on outside interests
  • insurance and/or indemnity arrangements

A non-executive director letter of appointment is a formal letter appointing someone as a non-executive director of a company. It sets out the main terms of the appointment and the non-executive director's responsibilities and duties within the company’s Board of Directors.

A letter of appointment sets out clearly what the directorship terms are and frames the relationship between the director and the company. It ensures the non-executive director operates in the business' best interests during the whole course of their office.

A non-executive director is a company director who does not run the business day-to-day. Instead, they attend board meetings and provide independent oversight. For more information, read Different types of company director.

Under the Companies Act 2006 the legal duties, responsibilities and potential liabilities of NEDs are the same as those of any other directors (eg executive directors). However, the distinction between them lies in the role that they perform. As stated above, non-executive directors do not engage in the day-to-day running of the business, but rather assist other directors in their strategic decision-making process. 

In particular, the role of the non-executive director includes:

  • helping develop proposals on business strategy

  • reviewing and monitoring management performance

  • making sure the risk management systems are robust and efficient

  • determining appropriate levels of remuneration of executive directors, and appoint or remove executive directors

  • taking into account the views of shareholders and stakeholders

A company director is an officer of the company (also known as an ‘office holer’) and not an employee. However, in some cases, directors may also be employees. For example, executive directors will typically be directors and employees. Whether or not a director is classified as an employee will depend on the specifics of the situation. Ask a lawyer if you have any questions or concerns about this.

This letter is a contract for services and not a contract of employment. This means that this LOA can be used to appoint non-executive directors who are not classed as employees. As a result, it should not be used to appoint an executive director, who should enter into a Senior employment contract with the company.

It is good practice to offer indemnity or insurance protection against liabilities associated with a non-executive director's office. For example, the company can decide to pay back to the non-executive director all reasonable costs for independent professional advice, where necessary.

This document gives you the right to transfer personal data (eg names and address) out of the UK or European Economic Area (EEA). However, you can only transfer such personal data outside of the UK or EEA if there are appropriate safeguards in place (eg the organisation receiving the data is certified under an approved certification mechanism). Such safeguards should be set out in the employer's Data protection policy. For more information, read International transfers of personal data.

This non-executive director letter of appointment contains a a power of attorney from the director, enabling the company to remove them from office at the end of the appointment. As a result, it must be executed as a deed.

This means that this document must be signed on water (ie not e-signed):

  • by one director signing in the presence of a witness 

  • by two directors

For more information, read Execution of deeds.

Ask a lawyer if:

  • this document doesn’t meet your needs
  • the NED is to be an employee of the company
  • you are appointing directors of a public or listed company

This letter of appointment is governed by the law of England and Wales or the law of Scotland.

Other names for Non-executive director letter of appointment

Directors agreement, LOA, Non executive director letter of appointment, Appointment of a non executive director, NED letter of appointment, NED agreement.