An appointment letter for a Non-executive independent director is a formal letter appointing a person as a non-executive director. It outlines the terms and conditions of the appointment and 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 but is involved in making policies and taking strategic decisions in the company. Non-executive directors are sometimes appointed to lend prestige to the company due to their standing in the society.
Non-executive directors are sometimes appointed to lend prestige to the company due to their standing in the society.
Major elements of Appointment letter for Non-executive directors are as under:
- Role and duties: Non-executive directors are not involved in the day-to-day management of the company. They are expected to support the company in making strategic proposals, scrutinise the performance of the management in meeting goals and objectives of the company, ensuring the existence of strong financial controls and risk management system etc.
- Time Commitment: Non-executive directors should devote such time to the company that will help them to perform their roles and duties efficiently. They are expected to attend the board meetings, shareholders meetings and committee meetings of which they are a member etc.
- Fees: Non-executive directors are not the employees of the company. So, they are paid remuneration by the way of sitting fees for attending the board meetings and committee meetings. Such fees are decided by the board and approved by the shareholders. They are also entitled to reimbursement of expenses for travel, hotel and other incidental expenses incurred by them in the performance of their roles and duties.
- 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.
- 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.