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How to make a Non-executive director letter of appointment

This document is GDPR compliant.

Set out the terms of appointment for a non-executive director with this letter of appointment. This straightforward letter of appointment (LOA) is a great way to set out clear directorship terms, laying 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.

Use this letter of appointment:

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

This 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 Board of the company.

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 his office.

This letter is a contract for services and not a contract of employment. Therefore, it should not be used to appoint an executive director, who should enter into a Senior employment contract with the company.

A non-executive director should have the same legal responsibilities as any other director. However, the distinction between an executive and a non-executive director lies in the role that they perform. Non-executive directors do not engage in the day-to-day running of the business, but rather assist the executive directors in their strategic decision-making process. For more information, read Different types of company director.

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

  • help develop proposals on business strategy
  • review and monitor management performance
  • make sure the risk management systems are robust and efficient
  • determine appropriate levels of remuneration of executive directors, and appoint or remove executive directors
  • take into account the views of shareholders and stakeholders

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 employee data out of the UK or EEA. However, the employer can only transfer 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 further information, read International transfers of personal data.

Ask a lawyer for:

  • 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.

This letter of appointment must be executed as a deed as it contains a power of attorney from the director, enabling the company to remove him or her from office at the end of the appointment.

Other names for Non-executive director letter of appointment

Directors agreement, LOA, Non executive director letter of appointment.

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