Non-Executive Appointment Letter

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Non-Executive Appointment Letter (Drafting)

An appointment letter for a Non-executive independent director is a formal letter appointing a person as a non-executive director. The agreement provides for the terms and conditions of the appointment along with duties and responsibilities of such non-executive director towards the company.

A non-executive director is a director who does not participate in the day-to-day management of the company but is involved in making strategies and policy making decisions in the company. Non-executive directors are sometimes appointed to lend prestige to the company due to their standing in the society.

Features of Non-Executive Appointment Letter

1.Role and duties: Non-executive directors are not involved in the management of day-to-day activities of the company. They are usually help the company in making strategic proposals, scrutinize the performance of the management. They ensure the existence of strong financial controls and risk management system etc.

2.Fees: Non-executive directors are not the employees of the company. Hence, they are paid remuneration in the form of “sitting fees” for attending the board meetings and committee meetings. Such fees are decided by the board and approved by the shareholders. Their expenses for travel, hotel and other incidental expenses incurred by them in the performance of their roles and duties.

3.Termination: Non-executive directors can resign from their position as director after giving a notice period mentioned in the letter. Their appointment may also get terminated if not re-elected by the shareholders and also, the company may terminate the director in accordance with the provisions of articles of association.

4.Conflict of Interest: Non-executive directors may have business interests other than the company. They must declare all such business interests at the time of appointment as non-executive director in the company. Such interests include holding directorships in other companies, a partner in a firm or pursuing any other business etc. Such declaration is necessary to assess the possibility of any conflict of interest.

5.Time Commitment: Non-executive directors should devote such time to the company that will help them to perform their roles and duties efficiently. Their job is to attend the board meetings, shareholders meetings and committee meetings of which they are a member etc.

Documents

Passport Photo

Passport photo of all parties.

PAN Card

PAN card of all parties.

Aadhar Card

Aadhar card of all parties.

Utility Bill

Utility bill of Electricity or Telephone.

Address Proof

Valid Address Proof of all the parties.

Licence

Valid Driving Licence of all the parties.

Terms and Conditions

Terms and Conditions between the parties.

FAQ

Any person who has a non-executive position in a company or organization gives advice but is not responsible for making decisions or ensuring that decisions are carried out.

Non-executive director must declare all such business interests at the time of appointment as non-executive director in the company. Such interests include holding directorships in other companies, a partner in a firm or pursuing any other business etc. Such declaration is necessary to assess the possibility of any conflict of interest.

Essentially the non-executive director's (NED) role is to provide a different perspective and contribution to the board by providing independent oversight and constructive challenge to the executive directors. However, it is important that they show the same commitment to its success as their executive colleagues.

Non-Executive Directors' shall be paid a sitting fee. Under the Companies Act, 2013, Section 197 allows a company to pay remuneration to its Non- Executive Director(s) either by way of a monthly payment or at a specified percentage of the net profits of the company.

Since directors are liable for the primary management of the company, it's only logical that they're liable for their actions done in the course of business. A non-executive will be held responsible just the same as any other director if a loss should occur due to breaches by the directors of their assigned duties.

Non-executive directors provide independent oversight and serve on committees concerned with sensitive issues such as the pay of the executive directors and other senior managers; they are usually paid a fee for their services but are not regarded as employees.