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United Kingdom
United Kingdom
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Non-executive director (NED) meaning
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What does Non-executive director (NED) mean?
A non-executive director (NED) is a board member who does not take part in the company’s day-to-day management. In practice, NEDs provide independent oversight, strategic challenge and external expertise, and commonly chair or sit on audit, remuneration and nomination committees; one may act as senior independent director.
“NED” is a corporate governance term rather than a statutory category. In law, a NED is a director and owes the same statutory and fiduciary duties, and faces the same potential liabilities, as an executive director. These include duties under the Companies Act 2006 (applicable in England and Wales, Scotland and Northern Ireland) and the Companies Act 2014 (Ireland), such as acting in good faith in the company’s interests, exercising reasonable care, skill and diligence, and managing conflicts of interest.
The UK Corporate Governance Code (and, for Irish listed companies, equivalent listing rules adopting that Code) sets expectations on NED independence, board composition, time commitment and risk oversight. NEDs are usually appointed under a letter of appointment (not an employment contract), remunerated by fees, and hold no operational authority unless specifically delegated. Usage and legal effect are broadly consistent across the UK and Ireland, with additional sectoral requirements in regulated financial services.
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View the related Practice Notes about Non-executive director (NED)
PRACTICE NOTES
Employment precedents quick finder: offer letters, contracts, executive service agreements, apprenticeships, interns and volunteers, NED appointments, section 1 particulars and zero-hours
This Practice Note outlines links to principal precedents in Lexis+UK Employment Practical Guidance, covering employment contracts, executive service agreements, and additional appointments, such as non-executive positions. Offer of employment See: Letter—offer letter for an employee Employment contracts See: Employment contract—basic version Employment contract for senior...
21 May
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PRACTICE NOTES
UK Corporate Governance Code: NEDs, Chair and SID in Listed Companies: Board and Committee Composition, Independence, Investor Expectations, and Directors’ Duties, Liability and Risk Management
This Practice Note Examines the provisions of the UK Corporate Governance Code (UKCG Code) concerning the governance function of the boards of companies with equity shares listed in the commercial companies category, and outlines the separate roles and accountabilities of the chair, the senior independent director (SID) and non‑executive directors (NEDs). It further addresses the UKCG Code’s expectations on board composition, including the notion of independence under the Code. A non‑executive director (NED) is not a statutory creation or requirement, yet the position is central to achieving sound corporate governance. The Companies Act 2006 (CA 2006) draws no legal distinction between executive and non‑executive directors. NEDs therefore carry the same duties, responsibilities and potential liabilities at law as executive directors. For guidance on these legal obligations and liabilities, and the benchmarks to which all directors are held equally, see: Powers, duties and liabilities of directors—overview. Nonetheless, NEDs serving on listed company boards do have particular functions and responsibilities within the corporate governance landscape as set out by the UKCG...
21 May
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PRACTICE NOTES
UK FCA expectations of non-executive directors: SM&CR approvals, COCON conduct rules, retail conduct risk oversight, culture and challenge, governance reviews, and Consumer Duty obligations
General role and responsibility of a non-executive director (NED) For a comprehensive overview of the duties and accountability of NEDs, consult Practice Note: Non-executive directors and the listed company board—corporate governance roles and responsibilities. Guidance on the rules, expectations and remit of NEDs is likewise set out in the UK Corporate Governance Code (UKCG Code) and in the FRC Guidance on Board Effectiveness, both published by the Financial Reporting Council (FRC). For further details on the Code itself, see Practice Note: The UK Corporate Governance Code. NEDs who perform SMFs under the SM&CR With effect from 7 March 2016, the Senior Managers and Certification Regime (SM&CR) applied to UK banks, building societies, credit unions and Prudential Regulation Authority (PRA)-designated investment firms. The regime then covered all dual-regulated insurers on 10 December 2018, and from 9 December 2019 it was extended to FCA solo-regulated firms. The Senior Managers Regime also applies to benchmark administrators from 7 December 2020. The Financial Services and Markets Act 2023 (FSMA 2023) includes...
21 May
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