Guidance note

Sample non-executive
director’s appointment letter

February 2019
Sample non-executive
director’s appointment letter

Contents
Introduction 3

Sample letter 4

Appendix 16

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© The Institute of Chartered Secretaries and Administrators, 2019

The information given in this guidance note is provided in good faith with the intention of furthering the understanding of the subject
matter. While we believe the information to be accurate at the time of publication, ICSA and its staff cannot, however, accept any liability
for any loss or damage occasioned by any person or organisation acting or refraining from action as a result of any views expressed therein.
If the reader has any specific doubts or concerns about the subject matter they are advised to seek legal advice based on the circumstances
of their own situation.

2 February 2019
Sample non-executive
director’s appointment letter

Introduction
This sample letter is not intended to be a prescriptive template. It reflects the various
practices of some of the larger companies and aims to provide an initial checklist of the
elements a company may wish to cover in its appointment letters. It has been updated
to reflect the 2018 versions of the UK Corporate Governance Code and Guidance on
Board Effectiveness. The text and content should be adapted to suit the company’s own
circumstances.

As well as incorporating standard contract terms, the sample letter covers the reference
in the Financial Reporting Council ("FRC")’s Guidance on Board Effectiveness 2018 to
time commitment:

"It is vital that non-executive directors have sufficient time available to discharge
their responsibilities effectively. The time commitment to engage with shareholders
and other key stakeholders and get to know the business can be considerable. It is
advisable for non-executive directors to assess the demands of their portfolios and
other commitments carefully before accepting new appointments. They should devote
time to developing and refreshing their knowledge and skills to ensure that they
continue to make a positive contribution to the board and generate the respect of the
other directors."1

1 FRC Guidance on Board Effectiveness 2018, paragraph 76

3 February 2019
Sample non-executive
director’s appointment letter

Sample letter
I am pleased to confirm that upon the recommendation of the nomination committee,
the Board has approved your appointment as [an independent/a non-independent]
non-executive director of [name of company] ("the Company"). This letter sets out the
main terms of your appointment.

It is agreed that, on acceptance of this offer, this letter will constitute a contract for
services and not a contract of employment.

1 Appointment

1.1 Subject to the remaining provisions of this letter, [your appointment is for an initial
term of three years commencing on [date]] [your appointment is for an initial term,
from [date] until the conclusion of the Company’s Annual General Meeting ("AGM")
occurring approximately three years from that date], unless terminated earlier by
either party giving to the other party [one/three] month[’s] [s’] written notice.

1.2 Your appointment is subject to the articles of association. Nothing in this letter shall
be taken to exclude or vary the terms of the articles of association as they apply to
you as a director of the Company. Your continued appointment as non-executive
director is subject to election by the Company’s shareholders at the AGM scheduled
to be held on [date] and to re-election at any subsequent AGM at which either the
articles of association of the Company require, or the Board resolves, that you stand
for re-election.

[In accordance with Provision 18 of the FRC’s UK Corporate Governance Code 2018
all directors will be subject to annual re-election at the AGM.]

If the shareholders do not re-elect you as a director, or you are retired from office
under the articles of association, your appointment shall terminate automatically,
with immediate effect and without compensation.

1.3 Continuation of your contract of appointment is also contingent on satisfactory

performance and any relevant statutory provisions relating to the removal of a
director.

4 February 2019
Sample non-executive
director’s appointment letter

1.4 Non-executive directors are typically expected to serve two three-year terms but
may be invited by the Board to serve for an additional period. Any term renewal
is subject to Board review and AGM re-election. Notwithstanding any mutual
expectation, there is no right to re-nomination by the Board, either annually or after
any three-year period.

1.5 You [will/may] be required to serve on one or more committees of the Board. You
will be provided with the relevant terms of reference on your appointment to such a
committee. [You also [will/may] be asked to serve as a non-executive director on the
board of any of the Company’s subsidiaries or joint ventures, or as Senior Independent
Director.] Any such appointment will be covered in a separate communication.

1.6 Notwithstanding paragraphs 1.1–1.5, we may terminate your appointment with

immediate effect if you:

(a) commit a material breach of your obligations under this letter;

(b) commit any serious or repeated breach or non-observance of your obligations
to the Company (which include an obligation not to breach your duties to the
Company, whether statutory, fiduciary or common-law);
(c) are guilty of any fraud or dishonesty or have acted in a manner which, in the
opinion of the Company acting reasonably, brings or is likely to bring you or
the Company into disrepute or is materially adverse to the interests of the
Company;
(d) are convicted of any arrestable criminal offence [other than an offence under
road traffic legislation in the UK or elsewhere for which a fine or non-custodial
penalty is imposed];
(e) are declared bankrupt or have made an arrangement with or for the benefit of
your creditors; or
(f) are disqualified from acting as a director.

1.7 On termination of your appointment, you shall at the request of the Company
resign from your office as a director of the Company [and all offices held by you in
any Group company].

1.8 If there are matters which arise which cause you concern about your role you
should discuss them with me [or the Senior Independent Director]. If you have any
concerns which cannot be resolved, and you choose to resign for that, or any other,
reason, you should provide an appropriate written statement to me [or the Senior
Independent Director] for circulation to the Board.

5 February 2019
Sample non-executive
director’s appointment letter

2 Time Commitment

2.1 You will be expected to devote such time as is necessary for the proper performance
of your duties and you should be prepared to spend at least [number of days] days
per [month/year] on company business after the induction phase. This is based on
preparation for and attendance at:

• scheduled Board meetings;

• [Board dinners];
• [the annual Board strategy away-day(s)];
• the AGM;
• [site visits];
• meetings of the non-executive directors;
• meetings with shareholders;
• updating meetings/training; and
• meetings as part of the Board evaluation process.

[Meetings may involve you in some overseas travel.] Unless urgent and unavoidable
circumstances prevent you from doing so, it is expected that you will attend the
meetings outlined above.

2.2 The nature of the role makes it impossible to be specific about the maximum time
commitment, and there is always the possibility of additional time commitment in
respect of preparation time and ad hoc matters which may arise from time to time,
and particularly when the Company is undergoing a period of increased activity.
At certain times it may be necessary to convene additional Board, committee or
shareholder meetings.

2.3 The average time commitment stated in 2.1 will increase should you become a
committee member or chair, or if you are given additional responsibilities, such as
being appointed the Senior Independent Director, [or] non-executive director on
the boards of any of the Company’s subsidiaries [or the designated Non-Executive
Director in respect of ‘workforce engagement’ activities relevant to the Company].2
Details of the expected increase in time commitment will be covered in any relevant
communication confirming the additional responsibility.

2.4 By accepting this appointment you undertake that, taking into account all other
commitments you may have, you are able to, and will, devote sufficient time to your
duties as a non-executive director.

2 See Appendix A for reference to the FRC Corporate Governance Code 2018 and associated Board Effectiveness Guidance 2018.

6 February 2019
Sample non-executive
director’s appointment letter

3 Duties

3.1 You will be expected to perform your duties, whether statutory, fiduciary or
common-law, faithfully, efficiently and diligently to a standard commensurate with
both the functions of your role and your knowledge, skills and experience.

3.2 You will exercise your powers in your role as a non-executive director having
regard to relevant obligations under prevailing law and regulation, including the
Companies Act 2006, the UK Corporate Governance Code 2018 and associated
guidance3 and the FCA’s Listing, Prospectus, and Disclosure and Transparency Rules.
[You are also required to comply with the requirements of the [New York/other
Stock Exchange]. You will be advised by the Company Secretary where these differ
from requirements in the UK.]

3.3 You will have particular regard to the general duties of directors as set out in
Part 10, Chapter 2 of the Companies Act 2006, including the duty to promote the
success of the company under Section 172 of the Act:

"A director of a company must act in a way he considers, in good faith, would be
most likely to promote the success of the company for the benefit of its members as
a whole, and in doing so have regard (amongst other matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the company’s employees;
(c) the need to foster the company’s business relationships with suppliers,
customers and others;
(d) the impact of the company’s operations on the community and the
environment;
(e) the desirability of the company maintaining a reputation for high standards of
business conduct; and
(f) the need to act fairly as between members of the company."

3 The FRC’s associated guidance comprises: i. Guidance on Board Effectiveness 2018 ii. Guidance on Risk Management, Internal Control
and Related Financial and Business Reporting 2014 and iii. Guidance on Audit Committees 2016.

7 February 2019
Sample non-executive
director’s appointment letter

3.4 You will have particular regard to the FRC’s UK Corporate Governance Code 2018
and associated Guidance on Board Effectiveness in respect of the role of the board4
and the role of the non-executive director.

In your role as non-executive director you will be required to:

• constructively challenge and help develop proposals on strategy;

• scrutinise the performance of management in meeting agreed goals and

objectives and monitor the reporting of performance;

• satisfy yourself on the integrity of financial information and that financial

controls and systems of risk management are robust and defensible;

• determine appropriate levels of remuneration of executive directors and have

a prime role in appointing and, where necessary, removing executive directors,
and in succession planning;

• devote time to developing and refreshing your knowledge and skills;

• uphold high standards of integrity and probity and support me and the other
directors in instilling the appropriate culture, values and behaviours in the
boardroom and beyond;

• insist on receiving high-quality information sufficiently in advance of board

meetings; and

• take into account the views of shareholders and other stakeholders where
appropriate.

3.5 You will be required to exercise relevant powers under, and abide by, the Company’s
articles of association.

3.6 You will be required to exercise your powers as a director in accordance with the
Company’s policies and procedures [and internal control framework].

4 Excerpts on the role of the board have been appended to this contract in Appendix A

8 February 2019
Sample non-executive
director’s appointment letter

3.7 You will disclose any direct or indirect interest which you may have in any matter
being considered at a board meeting or committee meeting and, save as permitted
under the articles of association, you will not vote on any resolution of the Board,
or of one of its committees, on any matter where you have any direct or indirect
interest.

3.8 You will immediately report to me your own wrongdoing or the wrongdoing or
proposed wrongdoing of any employee or director of which you become aware.

3.9 Unless specifically authorised to do so by the Board, you will not enter into any legal
or other commitment or contract on behalf of the Company.

4 Remuneration and expenses

4.1 The annual fee rate as at the date of this letter is £[amount] gross per annum, paid
[monthly/quarterly] in arrears. This fee covers all duties, including service on any
board committee or company subsidiary, with the exception of committee chair and
certain additional responsibilities, such as taking on the role of Senior Independent
Director. [In your case, a further fee of £[amount] is payable as at the date of this
letter for taking on [chair of the [name of committee] Committee] [./and] [the role
of Senior Independent Director].]

4.2 All fees will be paid through the Company payroll and are subject to income tax
and other statutory deductions as required, based on your position as an appointed
director and as such an officer of the Company.

4.3 Fees will be subject to an [annual/periodic] review by the Board.

4.4 [You will comply with the Company’s requirements regarding the minimum
shareholding level (agreed from time to time by the Board).]

4.5 The Company will reimburse you for all reasonable and properly-documented
expenses you incur in performing the duties of your office. The procedure and other
guidance in respect of expense claims is set out in [name of document].

4.6 On termination of the appointment you shall only be entitled to such fees as may
have accrued to the date of termination, together with reimbursement in the
normal way of any expenses properly incurred prior to that date.

9 February 2019
Sample non-executive
director’s appointment letter

5 Independence and outside interests

5.1 [The Board of the Company has determined you to be independent, taking account
of the guidance contained in Provision 10 of the UK Corporate Governance Code
2018.]

5.2 You have already disclosed to the Board the significant commitments you have
outside this role. You must inform me in advance of any changes to these
commitments. In certain circumstances the agreement of the Board may have to
be sought before accepting further commitments which either might give rise to
a conflict of interest or a conflict of any of your duties to the Company, or which
might impact on the time that you are able to devote to your role at the Company.

5.3 It is accepted and acknowledged that you have business interests other than those
of the Company and have declared any conflicts that are apparent at present. In the
event that you become aware of any further potential or actual conflicts of interest,
these should be disclosed to me and the Company Secretary as soon as they
become apparent and, again, the agreement of the Board may have to be sought.

6 Confidentiality

6.1 You acknowledge that all information acquired during your appointment is
confidential to the Company and should not be released, communicated, nor
disclosed either during your appointment or following termination (by whatever
means), to third parties without my prior clearance.

6.2 This restriction shall cease to apply to any confidential information which may (other
than by reason of your breach) become available to the public generally.

6.3 You acknowledge the need to hold and retain company information (in whatever
format you may receive it) under appropriately secure conditions.

6.4 You hereby waive all rights arising by virtue of Chapter IV of Part I of the Copyright
Designs and Patents Act 1988 in respect of all copyright works created by you in
the course of performing your duties hereunder.

10 February 2019
Sample non-executive
director’s appointment letter

7 Price sensitive information and dealing in the Company’s shares

7.1 Your attention is drawn to the requirements under both law and regulation
regarding the disclosure of price sensitive information, and in particular to the
Disclosure and Transparency Rules of the FCA and Section 52 of the Criminal Justice
Act 1993 on insider dealing. You should avoid making any statements that might
risk a breach of these requirements. If in doubt please contact me or the Company
Secretary.

7.2 During your period of appointment you are required to comply with the provisions
of the Market Abuse Regulations, as annexed to the Listing Rules of the FCA, in
relation to dealing in the Company’s listed securities, and any such other code as
the Company may adopt from time to time which sets out the terms for dealings
by directors in the Company’s listed securities. A copy of the current share dealing
code adopted by the Company will be provided to you separately.

8 Induction

8.1 Immediately after appointment, the Company will provide a comprehensive, formal
and tailored induction [which will involve travel overseas]. You will be expected to
make yourself available during your first year of appointment for not less than an
additional [10] days for the purposes of the induction. The Company Secretary will
be in touch with further details.

9 Review process

9.1 The performance of individual directors and the whole Board and its committees is
evaluated annually. Further details will be provided as part of the induction process.

10 Development and training

10.1 On an ongoing basis, and further to the annual evaluation process, we will make
arrangements for you to develop and refresh your skills and knowledge in areas
which we mutually identify as being likely to be required, or of benefit to you,
in carrying out your duties effectively. You should endeavour to make yourself
available for any relevant development and training sessions which may be
organised for the Board.

11 February 2019
Sample non-executive
director’s appointment letter

11 Insurance and indemnity

11.1 The Company has directors’ and officers’ liability insurance (D&O) in place and it is
intended to maintain such cover for the full term of your appointment. You have
been informed of the current indemnity limit, on which the Board is updated from
time to time. A copy of the policy and other details of the cover are available from
the Company Secretary.

11.2 You will also be granted a deed of indemnity by the Company.

12 Independent professional advice

12.1 Circumstances may occur when it will be appropriate for you to seek advice from
independent advisers at the Company’s expense. A copy of the Board’s agreed
procedure under which directors may obtain independent advice will be provided
by the Company Secretary. The Company will reimburse the reasonable cost of
expenditure incurred by you in accordance with its policy.

13 Changes to personal details

13.1 You shall advise the Company Secretary promptly of any change in address or other
personal contact details.

14 Return of property

14.1 Upon termination of your appointment with the Company (for whatever cause),
you shall deliver to the Company all documents, records, papers or other company
property which may be in your possession or under your control, and which relate in
any way to the business affairs of the Company, and you shall not retain any copies
thereof.

12 February 2019
Sample non-executive
director’s appointment letter

[15 Non-compete clause

15.1 By countersignature of this letter and in consideration for the fees payable to you
under the terms of this letter, you now agree that you will not (without the previous
consent in writing of the Company), for the period of six months immediately after
the termination of your office, whether as principal or agent and whether alone or
jointly with, or as a director, manager, partner, shareholder, employee or consultant
of, any other person, carry on or be engaged, concerned or interested in any
business which is similar to or competes with any business being carried on by the
Company [or any company in the Group.]]

16 Data protection

16.1 By signing this letter you consent to the Company holding and processing
information about you for legal, personnel, administrative and management
purposes and in particular to the processing of any sensitive personal data (as
defined in the Data Protection Act 2018, incorporating the GDPR) including, as and
when appropriate:

(a) information about your physical or mental health or condition in order to

monitor sick leave and take decisions as to your fitness to perform your duties;
(b) information about you that may be relevant to ensuring equality of
opportunity and treatment in line with the Company’s equal opportunities
policy and in compliance with equal opportunities legislation; and
(c) information relating to any criminal proceedings in which you have
been involved, for insurance purposes and in order to comply with legal
requirements and obligations to third parties.

You consent to the transfer of such personal information to other offices the
Company may have [or to a company in the Group] or to other third parties,
whether or not outside the European Economic Area, for administration purposes
and other purposes in connection with your appointment, where it is necessary or
desirable for the Company to do so.

16.2 You will comply at all times with the Company’s data protection policy, a copy of
which will be provided to you.

13 February 2019
Sample non-executive
director’s appointment letter

17 Rights of third parties

17.1 The Contracts (Rights of Third Parties) Act 1999 shall not apply to this letter. No
person other than you and the Company shall have any rights under this letter and
the terms of this letter shall not be enforceable by any person other than you and
the Company.

18 Law

18.1 Your engagement with the Company is governed by and shall be construed in
accordance with the laws of [country] and your engagement shall be subject to the
jurisdiction of the courts of [country].

18.2 This letter constitutes the entire terms and conditions of your appointment and no
waiver or modification thereof shall be valid unless in writing and signed by the
parties hereto.

If you are willing to accept these terms of appointment, please confirm your acceptance
by signing and returning to me the enclosed copy of this letter.

Yours sincerely

__________________________________________
[name]
Chair

____________________________________________________________________________

I confirm and agree to the terms of my appointment as a non-executive director of [name

of company] as set out in this letter.

__________________________________________ ______________________________
[name] [date]

14 February 2019
Sample non-executive
director’s appointment letter

Appendix A
The UK Corporate Governance Code 2018 on the role of the board:

Principle A

A successful company is led by an effective and entrepreneurial board, whose role is

to promote the long-term sustainable success of the company, generating value for
shareholders and contributing to wider society.

Principle B

The board should establish the company’s purpose, values and strategy, and satisfy
itself that these and its culture are aligned. All directors must act with integrity, lead by
example and promote the desired culture.

Principle C

The board should ensure that the necessary resources are in place for the company to
meet its objectives and measure performance against them. The board should also
establish a framework of prudent and effective controls, which enable risk to be assessed
and managed.

The FRC Guidance on Board Effectiveness states:5

An effective board defines the company’s purpose and then sets a strategy to deliver
it, underpinned by the values and behaviours that shape its culture and the way it
conducts its business. It will be able to explain the main trends and factors affecting
the long-term success and future viability of the company – for example technological
change or environmental impacts – and how these and the company’s principal risks
and uncertainties have been addressed.

Boards have a responsibility for the health of the company and need to take a long-
term view. This is in contrast to the priorities of some investors, not all of whom will be
aligned with the pursuit of success over the long-term. An effective board will manage
the conflict between short-term interests and the long-term impacts of its decisions; it
will assess shareholder and stakeholder interests from the perspective of the long-term
sustainable success of the company.

5 Extracts from Guidance on Board Effectiveness 2018: Section 1 Board Leadership and Company Purpose

15 February 2019
Sample non-executive
director’s appointment letter

Effective directors will understand their duties both collectively and individually.
Directors’ duties are formally set out in sections 171–177 of the Companies Act 2006.
Directors are expected to act in a manner consistent with their statutory duties, and
to uphold the highest standards of integrity and support the chair in instilling the
appropriate values, behaviours and culture in the boardroom and beyond.

Complete versions of the UK Corporate Governance Code 2018 and the FRC Guidance
on Board Effectiveness 2018 can be found at: www.frc.org.uk/corporate/ukcgcode.cfm

16 February 2019
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February 2019