As a director of a company, you are responsible for managing the business operations, strategies, and financial decisions. However, with great power comes great responsibility, and that’s why it’s essential to sign a Director Service Agreement (DSA).
A director service agreement is a written contract between the director and the company, detailing the roles, responsibilities, and expectations of the director’s services. This agreement outlines the director’s fiduciary duty, which is the legal obligation to act in the best interest of the company, and the terms of their engagement.
DSA is a critical document that protects both the company and the director. It provides certainty and clarity about the director’s services and minimizes the risk of disputes arising between the parties. Moreover, it establishes a framework that defines the director’s rights, obligations, and liabilities, which are essential in avoiding any potential legal issues.
A DSA typically includes the following key provisions:
1. Appointment and Term: This section outlines the director’s appointment, the term of the agreement, and the terms of their engagement.
2. Duties and Responsibilities: This section details the director’s duties and responsibilities, including their obligations to act in the best interests of the company, exercise due care, and comply with all laws and regulations.
3. Remuneration: This section outlines the director’s compensation, including their salary, benefits, and expenses.
4. Confidentiality and Non-Disclosure: This section establishes the director’s obligation to maintain confidentiality, not to disclose any confidential information, and not to use the information for their own benefit.
5. Termination: This section outlines the circumstances and procedures for terminating the agreement, including the director’s rights and obligations upon termination.
In addition to the above provisions, a DSA may also include other clauses, such as indemnification, insurance, non-compete, and dispute resolution.
In conclusion, entering into a director service agreement is essential for all parties involved in a directorship engagement. It outlines the expectations, duties, and responsibilities of the director’s services, ultimately protecting both the company and the director. Consult with legal counsel and ensure that your DSA is tailored to your specific circumstances.