Non-Executive Directors

Non‐Executive Directors are appointed in the same way as Executive Directors and are appointed by the board.  A Non‐Executive Director’s details are filed at Companies House in the usual way.

A Non‐Executive Director, you will be issued with a contract for services rather than a contract of employment, occasionally appointed for a specific term, or for the duration of a particular project.

You have the same general legal responsibilities to the company as any other Director as detailed in The Companies Act 2006.

You will not be required to report to the Chief Executive or be involved in the day‐to‐day running of the company, however you would likely be involved with:

• Strategy – you should constructively challenge and contribute to the development of strategy. You may have been chosen because you have specialist knowledge, skills and attributes
• Performance – you should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance
• Risk – you should satisfy yourself that financial information is accurate and that financial controls and systems are robust and defensible
• People – you are responsible for determining appropriate levels of remuneration for Executive Directors and have a prime role in appointing and, where necessary, removing, senior management

Non‐Executive Directors bring an important ‘checks and balances’ function to the board.  By virtue of their independence from executive office and because of the absence of any significant financial interest in the company, they counter‐balance the power and operational interest of executive directors.

The law is moving towards a more objective and demanding standard of skill and care for company Directors, however it is recognised that the knowledge, skill and experience expected will vary between Directors with different roles and responsibilities (for example, between the Finance or Sales Director and a Non ‐ Executive Director.)  Moreover, a higher standard of skill would also be expected of a Director who is unusually skilled or qualified.

As all Directors can face personal liability in certain circumstances despite the limited liability status of a company, a company should arrange Directors and Officers Insurance for Non ‐ Executive Directors which will act as a basic protection against claims by third parties.