The Companies Act 2006 (CA 2006) requires any provision in a director's service contract under which the guaranteed term of the director's employment is, or may be, longer than two years to be subject to approval by the members of the company. Approval is required as long term service contracts with directors are arrangements which are generally considered to be particularly open to abuse. The relationship between the statutory provisions requiring approval of such a provision and the general duties of a director that are set out in statute is discussed in Practice Note: Directors' duties—fundamentals.

The term ‘director’, for the purpose of these statutory provisions, includes any person occupying the position of director, by whatever name called (ie, whatever the official title used), and a shadow director.

A company must observe various other statutory requirements In relation to directors’ service contracts, see in particular Practice Note: Directors’ service contracts—retention, copying and inspection.

Companies with a listing of equity shares in the equity shares (commercial companies) category on the Official List of the London Stock Exchange (listed