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.
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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
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
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
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