Settlement agreements for directors and senior executives

Senior departures carry more weight than standard exits. Whether you're managing a board-level restructure, responding to shareholder pressure, or handling a breakdown in trust, the stakes and risks are higher.

If you're an employer handling a senior exit — or a director looking for clarity around your position — our employment solicitors can help you prepare or review the terms of a proposed agreement.

Settlement agreements provide a structured way to bring senior employment to an end on agreed terms. They allow both sides to move on cleanly while protecting the business from legal, reputational, and operational fallout.

Why exits at this level need more care

From finance and tech to retail, media and professional services, many sectors are seeing increased pressure on leadership teams. Strategic realignments, cultural change, investor demands and business restructuring have led to a rise in senior-level exits — sometimes planned, sometimes less so.

Unlike junior roles, senior executives often hold shares or options, sit on the board, or have decision-making authority with long-term impact. They may have signed a director's service agreement, been party to confidential board discussions, or carried reputational weight in the market. A poorly handled exit can disrupt the business well beyond the individual role.

What to include in a senior-level settlement agreement

While every exit is different, employers should consider the following when preparing terms:

• Outstanding contractual entitlements, including salary, bonus, and deferred pay.
   
• Equity or share option arrangements, including any clawback or vesting considerations.
   
• Treatment of directorships, board positions, and company registrations.
   
• Termination of shareholder rights or removal from shareholder agreements.
   
• Confidentiality, return of company property, and data obligations.
   
• Post-termination restrictions, including non-compete, non-solicit, and non-deal clauses.
   
• The wording of announcements or internal messaging about the departure.
   
• Tax indemnities where large payments or complex structures are involved.

The agreement should also confirm the waiver of claims and ensure the executive takes independent legal advice — a legal requirement for settlement agreements to be binding.

Tying in with director's service agreements

At this level, most senior employees will have a director's service agreement setting out their terms of employment, notice period, restrictive covenants, and entitlements. Any settlement agreement will need to reflect — and in some cases override — those terms.

Conflicts between contractual terms and proposed settlement wording can lead to disputes or delays, so reviewing both documents together is important before making an offer.

Managing timing and communication

Senior exits are often high-stakes and time-sensitive. In some cases, the employee may still be involved in regulatory matters, live projects, or investor relations. The process must be carefully managed to minimise disruption, maintain morale, and preserve external confidence.

Discussions should remain confidential until the agreement is finalised and all commercial or compliance obligations are resolved. Board approval or shareholder consent should be factored into the timeline where necessary.

Protecting the business during and after the exit

A well-drafted settlement agreement does more than bring the contract to an end. It ensures future claims are waived, reputation is protected, sensitive information stays secure, and restrictive covenants remain enforceable. It also provides clarity around shares, pensions, and liabilities — reducing the risk of future uncertainty. Handled properly, it can signal stability, not disruption.

If you're considering offering a settlement agreement to a director or senior executive, our employment solicitors can help you assess the risks, consider the timing of this, review any existing contracts, and prepare terms that protect your business.

We advise businesses and directors locally and nationwide. Wherever you're based, our team is here to help.

This article provides general guidance only. Settlement agreements must be tailored to the individual circumstances, so we recommend seeking specific legal advice.