Directors Service Agreement

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15.28 Directors Service Agreement:

1. By law, every employee must have a Service Contract and that may be called a Directors Service Agreement. It can be expected that 80% of a Directors Service Agreement is written by lawyers for the benefit of lawyers and is worthless to the parties involved.

2. Most contracts are worthless when all parties are working the way that was agreed, so contracts are only used when the relationship has broken down and one party chooses to claim damages against another party. In general, when a relationship breaks down, walk away and do not imagine that legal redress is desirable or feasible.

3. In this document and for reference purposes only, the term "12345 Ltd" is used to imply a fictitious company name. Directors Service Agreement (and all Service Contract) should be assumed to be liable to become public documents and should be phrased with that in mind.

4. UK law does not limit the number of employments and self-employments that a person may have.

Head of Agreement:

1. Remuneration: Each Director is a PAYE employee paid by the year and not by the hour. The annual salary shall be no more than the National Living Wage for a twenty hour working week. In 2018, that is represented as Twelve-Thousand (£12,000) UK pounds per year (that is paid as up to 1000 per month). Dividends as a share of profits shall be paid each quarter where applicable.

2. Hours: Each Director has the right to choose how many hours they work and when they work those hours. Every Director has a duty to carry out the services of a Director and that is expected to be in the order of twenty hours per week. A Director can choose to work any number of hours they wish, may choose to work for any other company in parallel and may move the hours they work from any week to any other week.

3. Pension: Each Director may be an appointed member of the "12345 Ltd" private pension scheme. The company makes monthly contributions to the private pension scheme up to the value of the Directors annual Remuneration. A Director has the right to make any additional contributions of any amount at any time, but are not expected to make regular contributions.

4. Subsistence: Each Director is entitled to drinks and food when working in the office and a fixed amount when working in other locations in accordance with the current expense policy. When working before 08:00, a fixed breakfast allowance may be claimed or actual breakfast receipts may be claimed and paid by "12345 Ltd". When working after 18:00, a fixed dinner allowance may be claimed or actual dinner receipts may be claimed and paid by "12345 Ltd". Directors are not expected to make a financial contribution to drinks and meals provided by the company. A glass of wine served with a meal is classified as reasonable, but entertainment is strictly excluded.

5. Uniform: Each Director provided by "12345 Ltd" with three set of company uniforms that includes protective clothing such as steel-toed footwear. As representatives of "12345 Ltd", Directors are expected to present themselves in a clean protective uniform when on duty. The HMRC definition of a uniform is clothing that would not be worn in a normal social environment - such as clothing with a distinctive company logo and/or name. Laundry and cleaning is paid by "12345 Ltd" to keep the uniforms in good condition, but damage and wear shall be replaced as applicable.

6. Tools: Directors are provided by "12345 Ltd" with applicable tools and consumables such as gloves and dust pads. Directors must inspect the tools on a regular basis in conformance with health and safety directives, and have damaged or worn tools replaced by "12345 Ltd".

7. Transport: Directors are entitled to travel business class by rail, air and ocean. Directors may travel on business by taxi where that is the most effective travel solution as a balance of time and convenience. Directors may travel on business by their own private vehicle and be paid by "12345 Ltd" at a rate of 45 pence per mile for the first ten-thousand miles.

8. Administration: Directors are entitled to claim a modest annual expense for the use of their home-office, including heat, light, power, Internet, phone and cooking. Additional insurance and financial annual expenses will be claimed. Take care NOT to claim expenses for amounts that the person would otherwise have paid, such as council tax and water rates.

9. Key Person: duties are imposed on all Directors to ensure that the office knows where the Director is at all times. A "12345 Ltd" mobile phone is provided to each Director so they can inform the office where they are at all times when they are not in the office. Directors are not credited with "personal" or "free" time. Directors are always on call to be on duty and handle any emergency or disaster.

10. Projects: may be organised as a legal limited company with its own annual accounts and the same shareholders. A project operational company operates with the same service agreement with an expectation that the company will be disolved when the project completes and dividends have been paid. For example: 12345 (KL) Ltd may be formed to operate the KL project with the project having its own legal financial accounts and dividend payments to shareholders. The company 12345 (KL) Ltd may pay management fees to 12345 Ltd for the services of Directors and administration.

Contract:

1. Definitions: "12345 Ltd is a fake name used to imply the actual company name involved".

2. Appointment: The person named "ABC" is appointed as Executive Director and Managing Director. The Director shall purchase one ordinary share in "12345 Ltd" with a value of one GB pound.

3. Duties: The Director must carry out all statutory duties such as filing annual accounts. The Director shall comply with the articles of association. The Director shall abide by any statutory, fiduciary or common law duties of "12345 Ltd". The Director shall not do anything that would disqualify then from acting as a Director. The Director shall comply with anti-corruption and bribery policy and related policies of "12345 Ltd". The Director shall use their best endeavours to promote, protect, develop and extend the business of "12345 Ltd". The Director shall comply with electronic communications policy and related policies of "12345 Ltd". The Director may choose to carry out other duties as they see fit.

4. Place of work: The Director has a normal place of work as the head office and registered office. The Director agrees to travel on business to any place as may be required for the proper performance of their duties.

5. Hours of Work: The Director has the right to choose their own hours of work and may vary those hours at any time for any reason.

6. Remuneration and Expenses: The Director shall choose and determine their own remuneration and expense policy within the constraints of UK laws. As a target, the national living wage for a twenty hour week may determine the annual remuneration. Salary shall be reviewed annually and monthly. The salary shall accrue day-by-day and be paid monthly in arrears. Remuneration is not impacted by the actual hours worked in any period. Expenses shall be reasonable and are wholly, properly, and necessarily incurred by the Director for the exclusive benefit of "12345 Ltd". Expenses should include VAT receipts and/or other evidence as applicable. The Director shall NOT invoice "12345 Ltd" as a self-employed trader for services provided. Where revenue exceeds purchases in any quarter and where that trend may continue, then a dividend may be paid to the Director to cause purchased costs to match revenue. Personal income tax is payable on dividends paid to shareholders. As an alternative or in addition, extra pension payments may be made by "12345 Ltd" to cause no tax liabilities to the Director.

7. Insurance: The Director is entitled to Directors Professional Indemnity and Liability Insurance to be paid by "12345 Ltd" on an annual basis.

8. Collective Agreements: This agreement may be additional to any other agreement with any other party. No collective agreements with trade unions shall apply.

9. Pension: "12345 Ltd" shall pay the Directors pension contributions as up to the amount of the Directors annual Remuneration.

10. Holidays: The Director shall choose and determine when they are on-duty, when they are working and when they are on leave such as holiday. The national annual statutory holiday entitlement is 28 days. Public holidays are 8 days. The Director is not expected to take up any holiday entitlement, but the Director free to choose any holiday entitlement. Holiday entitlement may be imagined as being based on a working year of 260 working days. Holidays not taken one month or year may be rolled over into other months or years. When the Director is on holiday they are still on-duty and must ensure that all statutory duties are carried out at the applicable time.

11. Sickness and Health: The Director shall choose and determine when they are sick, when they need a health checkup and when remedial action is needed. Where the Director is too sick to carry out their statutory duties, then the Director should terminate this contract.

12. Maternity Leave: "12345 Ltd" purposefully imposes no working hours on any Director and so a Director may take leave as and when they choose. Being on leave does not reduce a Directors statutory duties to operate "12345 Ltd" in full compliance with the law including monthly CIS returns, VAT returns and annual returns.

13. Paternity Leave: "12345 Ltd" purposefully imposes no working hours on any Director and so a Director may take leave as and when they choose. Being on leave does not reduce a Directors statutory duties to operate "12345 Ltd" in full compliance with the law including monthly CIS returns, VAT returns and annual returns.

14. Company Car: "12345 Ltd" does not provide a company car to any Director however a Director is free to choose to drive any vehicle they wish and may claim travel expenses in accordance with policy. "12345 Ltd" do not provide any fixed asset to a Director that could be said to have a benefit-in-kind. Directors have no benefit-in-kind liabilities.

15. Confidentiality: The Director is advised that most things that they say and do shall be taken down and may be used as evidence against the Director. The Director is advised to take confidentiality, privacy and security as core principals of their life. Use block chain to encrypt and replicate all information and never store any information on a local computer or phone - it will be stolen.

16. Intellectual Property: "12345 Ltd" owns everything that the Director authors at any time and at any place. Anything and everything that the Director invents is the property of "12345 Ltd". Copyright of everything written is the property of "12345 Ltd". Trade secrets cannot be restricted from a Director because they know what they know and that cannot be withheld or taken away. Patents are a liability that have very high costs to continually defend against multi-nationals - never patent anything. Intellectual property is a liability that may very high costs to defend - keep all information as a trade secret.

17. Termination: Either party may terminate this contract by giving twelve months notice in writing. The Director will sell their one share to "12345 Ltd" in return for one pound.

18. Payment in Lieu of Notice: (PILON) The Director is entitled to ten months payment in lieu of notice.

19. Retirement: The Director are not permitted to retire, but may die in contract or may terminate their contract.

20. Gardening Leave: The Director may take gardening leave at any time they choose.

21. Consequences of Termination: The Director will continue to be paid each month and may receive dividends until the end of their termination period. Pension rights accumulated before termination remain after termination.

22. Amalgamation and Reconstruction: The Director shall remain a Director of any change in company name or structure.

23. Competition: Directors may choose to compete with "12345 Ltd" directly or indirectly. Directors may poach customers, reuse suppliers and use their skills and knowledge to further their own benefit.

24. Outside Interests: The Directors is advised to be obsessed with their job to the point that it becomes their outside interest that is networked with people with similar interests.

25. Notices: Notice shall be given to a Director in writing and delivered to the registered office by the Director. Email and post are equivalent.

26. Governing Law: If you need to check the English legal status of this contract, then things have gone very pear shaped.

27. Previous Agreements and Contracts: can remain where applicable and future contracts may continue in parallel.

28. Supplemental Schedule: a Grievance Procedure and a Disciplinary Procedure. Where the relationship has broken down, nothing that is written in a grievance or disciplinary procedure is relevant - just terminate this contract and start again.

29. Staff Handbook: As a mountain of legal policies, procedures and clauses that the Director must comply with even if they cannot remember what they are.

30. Employee Warrant: The Director warrants that they are legally entitled to work in the UK.

31. Spend: A Director shall not spend another Directors money by way of unreasonable expenses or purchases that impact of future dividends.

32. Legal: The company shall be operated in a legal way and no Director shall be asked to do anything that could be classified by some to be illegal or immoral or not ethical.

33. Will: As a duty to employees and their families, Directors are assisted to get their Last Will and Testament put in order, together with adequate pension and end of life provisions.

34. Intellectual Property: Everything authored by an employee and paid for by an employer has the copyright of the author transfered to the employer. Where an idea, invention, patented method or work of art is created by an employee, then ownership is transferred by the employee to the employer who paid for the work to be done.

35. Other: All the other things that could be written down, but are of little consequence.

Expense Policy:

1. Directors expenses must be submitted monthly in accordance with "12345 Ltd" published expense policy and in accordance with HMRC regulations.

2. Subsistence: may be claimed when drinks and food are not provided by "12345 Ltd" in the office.

Up to five pounds or a VAT receipt for lunch when on duty and out of the office.

Up to five pounds or a VAT receipt for breakfast before 08:00 when on duty and out of the office.

Up to five pounds or a VAT receipt for dinner after 18:00 when on duty and out of the office.

In the office, drinks and food are provided on an equal basis to all employees and visitors.

Any meals that are not wholy and completely for and on behalf of "12345 Ltd" shall not be paid for by "12345 Ltd".

3. Travel: may be claimed when visiting customers or suppliers in remote places that are not in the office.

"12345 Ltd" will pay for all rail, road, air and ocean transport that is wholly for and on behalf of "12345 Ltd".

"12345 Ltd" will pay the Director for the use of the Directors private vehicle at a rate of 46 pence per mile for the first 10,000 miles.

Any travel that is not wholly and completely for and on behalf of "12345 Ltd" shall not be paid for by "12345 Ltd".

4. Uniform: clothing may be claimed when it needs to be replaced.

"12345 Ltd" will pay reasonable cleaning and laundry bills to keep uniform clothing in good condition.

Any clothing that is not part of an official "12345 Ltd" uniform shall not be paid for by "12345 Ltd".

Asset Policy:

1. It is an objective and mission of "12345 Ltd" to have no fixed assets, to have no equipment and to be worth such a small amount that the company would never be sued for damages. Theoretically, "12345 Ltd" could be closed down at the end of any month and a new company registered to continue business relationships with the minimum of fuss. Every step that is needed should be taken to ensure that total liabilities never exceed one months revenue.

2. A Director is not given any asset that could be classified as a benefit-in-kind. Where a Director is loaned a mobile phone to keep in contact when out of the office, that mobile phone is second hand and worth less than fifty pounds. Where a Director is loaned a laptop to manage the accounts, that laptop is second hand and worth less than fifty pounds.

3. When faced with any capital expenditure, the alternative monthly operational subscription is taken. A Director may buy assets and rent them to "12345 Ltd" and other companies where that would be applicable.

4. When special tools and/or equipment is needed to carry out a project, at the end of the project, the special tools and/or equipment is liquidated or scrapped. A Director may buy tools and equipment and rent them to "12345 Ltd" for the duration of a project where that would be applicable.

5. "12345 Ltd" shall never have assets that could be loaned to a Directors loan account, but the Director may make loans to "12345 Ltd" to fund cash flow delays, marketing and investments. Loans from a Director shall be repaid without interest when it is applicable.

6. Strategy: Nobody would ever claim damages against "12345 Ltd" because "12345 Ltd" have no assets and a zero balance sheet. "12345 Ltd" has limited liability and can be closed down in the event of any disaster and a new company registered as "12346 Ltd" to provide services to customers. "12345 Ltd" may be continually in debt to its Directors and its Directors have first claim on any assets in the event that the company closes down.

Other Offices:

1. "12345 Ltd" have a registered and head office in London and trading offices in Watford, Nice, Manchester, Singapore, Hemel Hempsted and Amersham.

2. Directors based in head office will be expected to travel to and from trading offices on a regular basis.

3. Directors based in trading offices will be expected to travel to and from head office on an occasional basis.

4. All trading offices have shared common financial accounts that are registered at head office.

5. "12345 Ltd" shall pay for Directors travel and subsistence when travelling between offices.

6. For customers who wish to help local suppliers, "12345 Ltd" will open trading offices for sales and marketing purposes in places close to such customers. Such offices may be a local telephone number, a call center, a web site and/or a local commissioned representative.

Payroll:

1. "12345 Ltd" deploy the normal HMRC provided online payroll system that is used monthly for all PAYE Directors.

2. Directors have a fixed monthly Remuneration that simplifies the "860.00" pound monthly return to be a clone of what was entered last time.

3. National insurance and income tax payments are expected to be minimised but can be made by bank transfer.

4. Do not confuse simplistic online payroll of employees with the "12345 Ltd" financial account.

Dividends:

1. Every day, each shareholder can view he complete and correct set of financial accounts as (1) revenue that has been banked, (2) purchases to suppliers, (3) expenses paid to Directors and (4) the profit and loss account. The amount of the profit is a fair indication of the potential total dividend that shall be paid in equal amounts to each shareholder.

2. In addition, management accounts show (5) invoices billed but not paid and (6) scheduled payments as liabilities that may have a direct impact on the total dividend.

3. Dividends are paid periodically when the company can afford to pay dividends from its financial account profits. The total amount of dividends is divided equally and paid to each shareholder with normal income tax deductions, but no national insurance costs.

4. Where profit is retained by the company, then the company shall pay corporation tax on that profit at the end of each financial year. A company with profit in the bank is worth suing because the cost of settlement is generally lower than the cost of defending any law suite. A company with no profit in the bank is not worth suing.

5. As a policy and with agreement of all shareholders; the company can be disolved and creditors paid with no liabilities on any party at any time.

Directors Loan Account:

1. Every Director has their own expence and loan account with the company.

2. When a Director makes a purchase wholly and exclusively for the benefit of the company, that is a loan by the Director to the company.

3. The Director will complete an expense form and will be repaid by the company at the end of the month or when the company can afford to make the payment.

4. In general, each Director is always owed money by the company and that money shall be repaid by the company to the Director with no tax liabilities. Directors loan accounts are always first in the queue to be repaid from revenue.

5. As a policy, the company shall not provide Directors with a short term loan from profits because that would impact on dividends paid to all shareholders.

Accounts:

1. "12345 Ltd" consolidated accounts on a monthly, quarterly and annual basis.

2. Accounts cover three amounts as:-

Revenue from Customers.

Purchases from Suppliers as a cost of sale.

Expenses from Directors as a loan before becoming a purchase.

3. All amounts are fragmented into:-

Net amount excluding VAT as the real trading amount.

VAT amount including VAT rate - these amounts are owned by HMRC and do not belong to "12345 Ltd".

Gross amount including VAT that does not belong to "12345 Ltd".

4. A distinct VAT accrual account is maintained to balance revenue VAT against purchased VAT. An online VAT return is submitted each quarter to summaries total income and total purchases.

5. A distinct CIS payment account is maintained to show amounts withheld from suppliers (subcontractors). An online CIS return is submitted each month to summaries total supplier payments and amount deducted.

6. A distinct CIS contribution account may be maintained to record what amounts customers deducted.

7. A micro-entity balance sheet is submitted online to Companies House each year that does not even record turnover.

8. A simplified account is submitted online to HMRC each year that is below most trading thresholds.

9. Do not confuse simplistic online accounts with clever financial advice, tax evasion and confused allowances - eliminate the junk and keep it simple.

Company Annual Party Rules:

1. "12345 Ltd" do NOT pay for any business entertainment - entertainment costs are not deductible against corporation tax and reduce dividends.

2. Staff entertainment is limited to minimise personal tax liabilities as a benefit-in-kind.

3. Staff (including spouse) entertainment must fall under the company annual party regulations - that is 150 pounds per person per year.

Garden Leave:

1. When am employee Directors Service Agreement is terminated and the employee is still being paid in full, the person is said to be on garden leave and remains an employee subject to normal conditions of employment, including company confidentiality.

2. To prevent an employee on garden leave from having access to confidential company information, then person may be restricted from any work place or work services such as email. It would not be logical to prevent an employee from associating with friends outside the work place where those friends may include other employees.

3. It would be illegal for a Directors Service Agreement to stop a person from earning a living and so restrictive convernants have little value. Facts are facts and while an employee is being paid in full, but on gardening leave pending termination, then those facts may be disclosed by either party to customers and suppliers.

4. If the company fail to pay the employee in full for any reason, then the company is in breach of contract and the employee is free to work for any other company. While the employee is being paid in full, then they must act as employees with regard to disclosures to prospective employers and customers.

5. Every person has the legal right to have as many employments as they choose at the same time, unless expressly restricted with an adequate reason agreed in the Directors Service Agreement. Every person has the right to work for themselves, to invest as they choose and to make things as they choose. Every person has the right to market themselves, to network with like minded people and to be known for their skills, qualification and special experiences.

6. An employer may have the right to stop paying the salary to a person on gardening leave where it can be proven that the employee is both working and being paid by another company to do a similar job. An employee on gardening leave doing work free of charge to learn new skills or to retain existing skills would not be in breach of conract and must still be paid in accordance with their Directors Service Agreement.

7. While emotions may be heated, the person who remains ethical, honest and truthful will feel much better in the long term. Its a small world and while one person works for another one year, in a few years time the reverse situation may happen. People who work together to resolve a difficult situation with a reasonable solution will find they can work together again in the future for mutual benefit.

Intermediaries Legislation IR35:

1. Control:.

When the customer paying a person controls the methods of work, then the person is employed.

When the person determines their method of work, then the person is self-employed.

2. Substitution:.

When a person always does the work personally and has never sent a substitute, then the person is employed.

When a person has the right to send in a named substitute and has actually sent in a substitute, then the person is self-employed.

3. Obligation:.

When there is a notice period of even one day (paid by time), then the person is employed.

When a person is paid by the customer to do a specific job, then the person is self-employed.

4. Business Characteristics:.

When the person has no financial risk, they do not have to correct work at their own expense, then the person is employed.

When the person does not have their own insurance and does not provide their own equipment, then the person is employed.

When the person carries the financial risk to complete the job no matter how long it takes, then the person is self-employed.

When the person must provide their own specialist equipment or software, then the person is self-employed.

5. Misconceptions:.

When the person has other customers - irrelevant to any one customer relationship - people may have many employments.

When the person works from home - irrelevant if the customer controls the method of work.

When the person works flexible hours - irrelevant if the person is paid by the hour.

6. Anti IR35 Requirements:.

* Contractor is a VAT registered limited liability company.

* Contractor determines how the job is done - i.e. window cleaner.

* Contractor determines who does the job - i.e. a team working together.

* Contractor provides the equipment needed to do the job - i.e. window cleaner.

* Contractor is paid by the job or service - regardless of how long it takes.

* Contractor is NOT paid by hour with a notice period.

* Contractor pays for corrections to faulty work as a liability.

* Contractor has professional liability insurance to go on-site and do the job.

* Contractor has many customer sources of revenue.

Document Control:

1. Document Title: Directors Service Agreement.

2. Reference: 161517.

3. Keywords: ITIL, Directors Service Agreement.

4. Description: Directors Service Agreement.

5. Privacy: Public education service as a benefit to humanity. This is not legal advice.

6. Issued: 11 Dec 2016.

7. Edition: 1.2.