Director appointment terms review for foreign-owned companies

A director appointment terms review examines whether the terms on which a board member holds office still match what the company needs from that role, and where the gap between the two creates exposure for the company or for the director personally. For a cross-border structure, the review usually surfaces where the local company law imposes duties the appointment letter never mentions, and where a regulatory filing depends on a fact nobody has checked since the appointment was made. The output is a written assessment the board can act on, not a form to be signed and filed.

A group holding company appoints a director to a subsidiary board on terms drafted for the parent's home jurisdiction, then leaves the letter unread for three years. In that time the subsidiary changes its registered office, takes on a new shareholder, and the director's own residence status shifts. None of this is reflected in the appointment terms, and nobody in the group has looked at what the letter actually commits the company to, or what it leaves silent.

This page sets out when the review is needed, what it produces, and where the advisory perimeter around it sits.

The situation this work addresses

Foreign-owned companies rarely draft director appointment terms from scratch. The letter of appointment is usually inherited: adapted from a template used elsewhere in the group, or carried over from a predecessor director without anyone checking whether the terms still fit the company's current structure, board composition and director requirements. A board tends to review the position when something changes around the appointment, not when the appointment itself changes.

Three situations recur. A subsidiary is added to a group and the parent wants the local board's terms to match the group's governance standard without importing obligations the local company law does not recognise. A director resigns or is removed, and the company discovers only at that point that the appointment terms say nothing about notice, indemnity or the return of company property. A regulator or counterparty asks a question about who actually controls the board, and the company finds the paperwork does not answer it cleanly. Where the underlying question is about the composition of the board itself rather than the terms of a single appointment, the relevant starting point is a board composition review, which looks at the board as a whole rather than at one appointment in isolation.

None of these situations is unusual. What is unusual is a group that reviews its appointment terms before one of them forces the question, and that timing difference is most of what separates a fixable gap from an exposed one.

What triggers it and why the timing matters

The review is usually commissioned reactively: a financing round, an audit query, a change of registered office, or the departure of a director who held more than one role in the group. Each of these events exposes the same underlying problem. The appointment terms were adequate for the situation they were written for, and the situation has since moved on without the paperwork moving with it. For a jurisdiction-specific illustration of how this plays out, see the director appointment terms review for companies in the Abu Dhabi Global Market, where the local framework attaches specific consequences to gaps that would pass unnoticed elsewhere.

Once a resignation is filed, the company's ability to negotiate the departing director's post-office obligations cannot be reversed by a later letter. Whatever the appointment terms said, or failed to say, at that moment is what governs, and any remedy the terms omitted closes off at the point the filing is made rather than at the point anyone notices the gap.

Timing matters because most of what a review corrects is only correctable prospectively. A term missing from an appointment made two years ago cannot be added to it retroactively; it can only be added to the next appointment, or to a variation the current director is asked to sign now. The earlier the terms are checked against the company's present structure, the more of the gap remains fixable, and the less of it has already hardened into something only a dispute, rather than a document, can resolve.

What the work produces, in sequence

The review proceeds in a fixed order, because each stage depends on the findings of the one before it. Skipping the order tends to produce a document that looks complete and is not.

• A mapping of the company's actual board composition against what the current appointment terms assume, identifying any director whose role, residence or other appointments have changed since the terms were signed.
• A memorandum setting out which duties, indemnities and termination provisions the existing terms cover, which they are silent on, and which sit in tension with the local company law that actually governs the appointment.
• A marked-up appointment letter or set of terms, showing precisely the amendments required to bring the position into line with the company's current structure.
• A board pack summarising the findings and the proposed amendments, drafted for the board to approve rather than for a lawyer to interpret further.

The sequence matters as much as the content. A marked-up letter produced before the mapping is complete tends to fix the symptom, such as a missing indemnity clause, without addressing the cause, such as a director who no longer meets the residence criteria the company's own constitution assumes. Where terms are to be approved by a board that meets across several time zones, the pack should also confirm whether board meetings can be held by video under the company's own constitution, since that governs how the amended terms are formally adopted, not merely how they are drafted.

Nothing in this sequence produces a document intended to sit unread. Each artefact is built to be used: the mapping by whoever maintains the company's governance records, the memorandum by whoever advises the board next time a director changes, the marked-up terms by the board itself at the point of signature.

Where this differs by jurisdiction

Company law sets the baseline for what a director appointment can and cannot say, and that baseline is not the same everywhere. Some jurisdictions treat the appointment letter as a private contract that the company law barely touches. Others require specific terms to be recorded with the corporate registry before an appointment takes effect, so that the registered version, not the internal letter, is what a counterparty or a regulator will actually see. A term that is standard drafting practice in one jurisdiction can be unenforceable, or simply beside the point, in another.

The differences that matter most to a cross-border group are rarely about drafting style. They are about which body within the company – the board, the shareholders, or a specific named officer – has the authority to agree the terms in the first place, and whether that authority is affected by where the company's registered office sits or where its directors are resident. A group that standardises appointment letters across its structure without checking this tends to produce documents that are internally consistent and locally unenforceable in at least one jurisdiction it operates in.

Where a jurisdiction requires the terms of appointment to be filed, the position becomes visible on the register from the date the filing is made, and any subsequent private variation does not alter what a third party checking the register will see. The only way to correct it at that point is to file again, not to agree quietly among the parties. Where the concern is not the director named on the register but a person who in practice directs the board without holding office, the relevant comparison is how shadow director recognition compares across jurisdictions, since the same appointment-terms review often has to account for that person as well.

None of this can be reduced to a single rule that holds across the jurisdictions this practice covers. What can be stated generally is that the question of authority, filing and enforceability has to be confirmed locally for each company in the group, rather than assumed to follow the group's home jurisdiction.

A board that has not looked at its appointment terms since the last change in structure is relying on documents that may no longer say what the company needs them to say. Reviewing them now, while the position is quiet, costs far less in disruption than reconstructing what should have been agreed once a director has already left.

Review your appointment terms. Write to info@hreithlaw.com with the jurisdiction and the structure.

What this service does not include

This review does not include acting as, supplying, sourcing or arranging a director, company secretary, nominee shareholder or trustee for the company. It does not include any activity for which a trust or corporate service provider licence is required, including standing ready to be appointed to the board, filing on the company's behalf as a matter of routine, or holding shares or company documents on the company's behalf.

The boundary is not a matter of preference. Advising on who should be appointed, on what terms, and against what criteria, is legal advice. Being the person appointed, or arranging for someone else to be, is a regulated activity in a number of the jurisdictions this practice covers, and the firm does not hold that licence. Confusing the two exposes the client, not the adviser, and it is the client's exposure this boundary is meant to protect.

• The requirement mapped against the company's actual structure, not a generic checklist drawn from another jurisdiction.
• Criteria the board can apply itself the next time an appointment is made or renewed.
• The current appointment terms reviewed and marked up against those criteria.
• An assessment of where personal exposure sits under the terms as they stand, and for whom.

Where the boundary above matters most is precisely where a group is tempted to solve a governance gap by asking someone, including this firm, to simply step into the vacant role. That option is not available, and treating it as available is itself a source of exposure rather than a solution to it. The correct next step is to have the current terms checked against what the company's structure now actually requires. For the resolutions a board typically needs to pass alongside a terms review, see which board resolutions are required for a director appointment terms review.

Review your appointment terms. Write to info@hreithlaw.com with the jurisdiction and the structure.

Frequently asked questions

What evidence should the board keep on director appointment terms review?

Keep the mapping memorandum, the marked-up terms and the board minute approving the amendment together, as one file. A board that can show it reviewed the terms and acted on the findings is in a materially different position from one that can only show the terms themselves.

What happens if director appointment terms review is not addressed?

The terms stay exactly as they were written, and a gap that would have been minor at the time of signing becomes the exposure of whoever holds the appointment when the event the gap failed to anticipate actually occurs. The cost of the gap does not stay level over time; it tends to surface at the worst possible moment, such as a departure or a dispute.

How often should director appointment terms review be reviewed?

There is no fixed interval that applies across every structure. The trigger is a change: a new shareholder, a change of registered office, a director taking on another role, or a filing deadline approaching that depends on facts the company has not recently checked. Reviewing on a fixed calendar rather than on these events tends to miss the changes that actually matter.

Does director appointment terms review change for a foreign-owned company?

Yes, in one specific respect. A foreign-owned company is more likely to have appointment terms drafted for a different jurisdiction's assumptions, so the review has to check not only whether the terms are complete but whether they are drafted for the right legal system in the first place. A domestically owned company rarely has that second question to ask.

What does director appointment terms review require in practice?

It requires treating the appointment as something that can go wrong, not as a formality completed once and forgotten. Most boards assume the appointment letter is administrative paperwork; the review exists precisely because that assumption is usually where the exposure comes from.

Markus Feldmann, Counsel, Board Structure & Governance

Markus advises boards of foreign-owned companies on the composition, terms and liability exposure of their directors across common-law and civil-law structures. He works primarily on the interface between a company's constitutional documents and the practical terms on which individual directors actually hold office, rather than on either in isolation.