An appointment letter is a formal notice that consists of all the terms and condition regarding the appointment of a non-executive independent director. The terms & conditions may include duties and key responsibility areas of such non-executive director towards the appointing company.
A non-executive director is a person who is a part of a company in creating policies and strategic decisions but is not a part of the day to day management of the company. Sometimes the non-executive director is appointed so as to bring goodwill to the company with the help of their image.
Appointment Letter for Non-Executive Directors’ Major Elements
Role and Duties
The role and duty of the non-executive director are creating strategies, proposals and to analyze the company’s performance. Although they do not participate in the day to day activities of the company the above roles and duties ensure financial controls and risk management.
The non-executive independent director gets remunerated on the basis of the number of the board meeting and committee meeting they have attended. Such remuneration of the non-executive directors is decided by the board and approved by the shareholders. They also get reimbursement for all their expenses including travel, hotel and other miscellaneous expenses incurred at the time of performing their roles and duties.
The terms and condition of the appointment consist of the notice period after resigning from the position of non-executive director. The company can also terminate the non-executive director and if the shareholder does not re-elect them they are deemed to be terminated.
Conflict of Interest
At the time of signing the appointment letter, the non-executive director must disclose all the conflicting interest of business they have other than the company. These interests may consist:
- Director of another company
- Partner of a firm
- Having any other business
This will help them to assess every probability of conflict of interest.