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Director Agreement
I need a director agreement for a newly appointed director who will oversee the technology division, with a focus on strategic planning and innovation. The agreement should include a 2-year term, performance-based bonuses, confidentiality clauses, and a 3-month notice period for termination.
What is a Director Agreement?
A Director Agreement is a legally binding contract between a company and its board member that spells out their roles, responsibilities, and terms of service. It covers key aspects like compensation, confidentiality obligations, and the director's fiduciary duties under the Companies Act, 2013.
Companies use these agreements to protect both parties' interests and ensure clear accountability. The document typically includes specific provisions about board meeting attendance, conflict of interest policies, and indemnification clauses. For listed companies in India, these agreements must align with SEBI guidelines and corporate governance norms.
When should you use a Director Agreement?
Use a Director Agreement when appointing new board members or updating terms for existing directors, especially during significant company transitions like IPOs or expansions. This document becomes essential for protecting both parties when directors take on strategic roles or gain access to sensitive information.
Companies need these agreements before directors begin their duties, particularly when handling complex governance matters or cross-border operations. Indian companies must have them in place when appointing independent directors, as required by the Companies Act. They're also crucial when directors receive special responsibilities or when companies need to clarify performance expectations and liability limits.
What are the different types of Director Agreement?
- Company Director Agreement: Standard agreement for regular board directors, covering basic duties and responsibilities
- Executive Director Employment Contract: For directors who also hold executive positions, including operational responsibilities and performance metrics
- Non Executive Director Agreement: Tailored for independent oversight roles, emphasizing advisory duties and independence requirements
- Managing Director Contract Of Employment: Comprehensive agreement for company heads, detailing strategic leadership and executive powers
Who should typically use a Director Agreement?
- Company Directors: Sign and comply with the agreement, taking on specified duties and responsibilities while gaining protection for their role
- Board of Directors: Reviews and approves Director Agreements, ensuring alignment with company strategy and governance
- Company Secretary: Drafts and maintains agreements, ensures compliance with Companies Act requirements
- Legal Counsel: Reviews terms, suggests modifications, and ensures agreements meet regulatory standards
- Shareholders: Benefit from clear director accountability and governance structures established by these agreements
- SEBI: Oversees compliance for listed companies and enforces corporate governance norms through these agreements
How do you write a Director Agreement?
- Director Details: Gather full legal name, address, DIN number, and qualifications of the appointed director
- Role Specifics: Define exact duties, board committee assignments, and reporting relationships
- Compensation Package: Document all forms of remuneration, including sitting fees, commission, and benefits
- Term Duration: Specify appointment period, renewal conditions, and termination clauses
- Company Information: Include registered office address, CIN, and board resolution approving appointment
- Compliance Check: Verify alignment with Companies Act requirements and SEBI guidelines if applicable
- Documentation: Our platform generates customized agreements ensuring all these elements are properly incorporated
What should be included in a Director Agreement?
- Appointment Terms: Detailed role description, duration, and board position specifics as per Companies Act
- Duties & Powers: Fiduciary responsibilities, decision-making authority, and attendance requirements
- Compensation Structure: Clear breakdown of fees, benefits, and reimbursement policies
- Confidentiality Clause: Protection of company secrets and intellectual property
- Conflict of Interest: Disclosure requirements and handling procedures
- Termination Provisions: Notice periods, grounds for removal, and resignation process
- Indemnification: Protection against legal liabilities while acting in official capacity
- Governing Law: Jurisdiction and dispute resolution mechanisms under Indian law
What's the difference between a Director Agreement and a Director Services Agreement?
A Director Agreement is often confused with a Director Services Agreement, but they serve different purposes in Indian corporate governance. While both deal with director relationships, their scope and application differ significantly.
- Legal Framework: Director Agreements primarily focus on board responsibilities and fiduciary duties under the Companies Act, while Director Services Agreements detail specific professional services beyond standard board duties
- Scope of Work: Director Agreements cover statutory obligations and corporate governance matters, whereas Director Services Agreements outline additional consulting or advisory services
- Compensation Structure: Director Agreements typically include board fees and standard benefits, while Director Services Agreements often involve separate professional fees and project-based compensation
- Term and Termination: Director Agreements align with board appointment terms, while Director Services Agreements can have independent durations based on specific service needs
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