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Director Profit Sharing Agreement Template for England and Wales

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Key Requirements PROMPT example:

Director Profit Sharing Agreement

"I need a Director Profit Sharing Agreement for our newly appointed Finance Director, offering a 5% share of annual net profits with quarterly payments, including good/bad leaver provisions and performance conditions linked to company growth targets."

Document background
The Director Profit Sharing Agreement is essential for companies in England and Wales seeking to align director interests with company performance through profit participation. This document establishes clear terms for profit calculation, distribution, and conditions for participation, while ensuring compliance with UK corporate and tax law. It's particularly valuable for growing companies wanting to incentivize and retain key directors, providing a structured framework for profit sharing that protects both the company's and director's interests.
Suggested Sections

1. Parties: Identifies the company and the director entering into the agreement

2. Background: Sets out the context of the agreement and director's appointment

3. Definitions: Defines key terms including 'Profits', 'Profit Share', 'Financial Year'

4. Profit Share Entitlement: Details the calculation method and percentage of profits

5. Payment Terms: Specifies when and how profit share payments will be made

6. Duration and Termination: Sets out the term of the agreement and termination provisions

7. Confidentiality: Obligations regarding confidential information and financial data

8. Tax Provisions: Treatment of tax obligations and responsibilities

9. General Provisions: Standard boilerplate clauses including governing law, notices, and entire agreement

Optional Sections

1. Good/Bad Leaver Provisions: Defines circumstances affecting profit share rights upon departure - used when company wants to incentivize retention

2. Clawback Provisions: Allows recovery of payments in specified circumstances - typically used for risk management in larger companies

3. Non-Competition Clauses: Restricts director's ability to compete post-termination - used when protecting company interests is crucial

4. Change of Control: Provisions dealing with profit share arrangements in case of company sale or merger - used for larger companies or those planning exit

Suggested Schedules

1. Schedule 1 - Profit Calculation Methodology: Detailed formula and accounting principles for calculating profit share

2. Schedule 2 - Performance Metrics: Specific KPIs or targets affecting profit share entitlement

3. Schedule 3 - Group Structure: If profit share includes multiple group companies, details their relationship

4. Schedule 4 - Excluded Items: List of items specifically excluded from profit calculations

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓÆµ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions





















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Relevant Industries
Relevant Teams
Relevant Roles
Industries

Companies Act 2006: Primary legislation governing company operations, including directors' duties (Sections 171-177), disclosure requirements, conflicts of interest provisions, and directors' remuneration reporting requirements for quoted companies

Employment Rights Act 1996: Framework for employment rights that may affect directors' arrangements, even though directors are not typically considered standard employees

Income Tax (Earnings and Pensions) Act 2003: Covers tax treatment of profit sharing payments, PAYE considerations, and benefits in kind implications for director remuneration

National Insurance Contributions Act 2014: Governs social security implications and requirements for profit sharing arrangements

Financial Services and Markets Act 2000: Relevant for FCA-regulated companies, particularly regarding remuneration codes and financial services requirements

Corporate Governance Code: Sets out remuneration principles, transparency requirements, and stakeholder considerations for listed companies

Equality Act 2010: Ensures non-discrimination in remuneration arrangements and equal treatment in profit sharing schemes

Small Business, Enterprise and Employment Act 2015: Contains transparency requirements affecting director compensation and business arrangements

Data Protection Act 2018 & UK GDPR: Regulates the processing and handling of personal financial data in relation to profit sharing arrangements

Finance Acts: Current tax regulations and provisions affecting profit sharing schemes and director remuneration

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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