Non-executive directors, despite their distinct role and responsibilities within a company, are not immune to the risks and claims that can be faced by any director.
While they may not be involved in the day-to-day operations or management decisions, they still hold a fiduciary duty towards the company and its stakeholders.
As such, non-executive directors can be held accountable for any breaches of their duties, such as negligence, fraud, or misrepresentation.
They are subject to the same legal and regulatory frameworks as other directors, and their actions or inactions can result in legal claims and liabilities.
It is essential for non-executive directors to exercise due diligence, stay informed, and actively participate in board discussions to minimize the risk of claims and fulfill their obligations effectively
What is a non-executive director?
Non-executive directors play a vital role in the governance and oversight of a company, bringing specific expertise and perspectives to the boardroom. While they may not be involved in the day-to-day management of the company, their responsibilities and potential risks are still significant. These directors are registered at Companies House and are appointed based on their specialized skills, such as accounting, law, or other relevant areas of expertise.
In some cases, non-executive directors also hold substantial shares in the company, particularly in smaller businesses or family-run enterprises. Even though they do not participate in daily operations, their significant shareholdings give them a vested interest in the company’s success and make their role more than just a supervisory one.
Non-executive directors can also be appointed to oversee specific aspects of the company or conduct independent reviews. This is especially common in larger organizations, where an independent non-executive director may be tasked with ensuring proper corporate governance practices and evaluating the management’s decisions.
These individuals may have specialized knowledge in areas like turnaround strategies, which can be valuable for companies facing financial difficulties and are often brought in by concerned lenders.
Regardless of their specific roles and responsibilities, non-executive directors are subject to the same risks and claims as other directors. They have fiduciary duties towards the company and its stakeholders, and any breaches of these duties can lead to legal consequences. Therefore, it remains crucial for non-executive directors to exercise diligence, act in the best interests of the company, and contribute actively to the board’s decision-making processes.
What are the duties of a non-executive director?
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.