Business - Franchises

A Short Guide for Non-Executive Directors

May 03, 2016

A non-executive director is a member of a company's board of directors who is not part of the executive team. A non-executive director (NED) typically does not engage in the day-to-day management of the organisation, but is involved in policy making and planning exercises.

However, it can sometimes be misunderstood that the responsibilities and duties of both executive and a non-executive directors. Legally, their responsibilities and legal duties are the same, despite the different level of executive involvement between the two types of directors. There has been an increasing emphasis placed on non-executive directors as their role in a company. 

Recommendations or things to think about if you are becoming or are an NED include: 

  • Carry out your own due diligence of the company you would be joining, before you join the board. This gives you confidence that you know what organisation you are coming into, warts and all. 
  • Understand your duties under the Companies Act 2006, that directors are bound by. If you are not familiar with these, seek independent legal advice. 
  • Take an active role in any induction or training programmes, so that you are better equipped to know all aspects of corporate governance, or keep up to date with issues effecting your organisation 
  • Read all information given you before making any decision – not properly paying attention to what you are agreeing to, and even raising questions, is irresponsible in your role 
  • Question everything – once a decision has been made, its hard to reverse it 
  • Get to know your company’s procedures on conflicts of interests, or hospitality. You do not want to risk being accused of going against any rules (based on legislation or otherwise) and ignorance will be little of an excuse. 

The key to remember is that your role as an NED is just as important as those who are executive directors. Ultimately you will be responsible as a director if anything went wrong, so make sure you are fully informed and aware of matters you are being asked to decide on, and if you are not sure, ask for more information. There are many courses out there designed to support NED roles, and it could be worth exploring those as well to keep up to date. 

Nicola Lucas

About the author

Nicola Lucas

Nicola is a member of our Business Law Team handling all the commercial requirements of her clients such as shareholder agreements and negotiating on commercial ...

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