Business Law from Rocket Lawyer UK

What is the role of a non-executive director?

Most people have heard of non-executive directors (NEDs) but the nature of their role is often shrouded in mystery. Whilst they have the same legal duties and responsibilities as executive directors and regularly attend board meetings, their non-executive status means that they are not normally involved in the everyday management of a company. They act more like consultants who are able to provide specialist experience or know-how, overseeing company strategy and ethics with an element of perspective that is often not available to directors who are involved in day-to-day matters.

Benefits of appointing non-executive directors for start-ups

It’s often assumed that NEDs are an expensive luxury, mainly found in large companies with the necessary resources to pay for an extra pair of eyes. However, it is actually start-ups which have the most to gain from the connections and experience which a non-executive director can bring to the table. NEDs tend to be highly experienced business people with a track record of helping SMEs successfully grow from a fledgling state into a well established market position. Aside from steering an entrepreneur in the right direction, their address books can open the doors to important new customers and a network of producers and suppliers relevant to the particular industry.

Providing a helping hand

No matter how well you may understand your business sector, there are always tricks to learn and more efficient ways of working towards your goals. There is no short cut to success in business but having access to a business mentor or marketing guru – in the form of a non-executive director – is a sure-fire way of achieving your targets more quickly and avoiding many of the obstacles which stand in the way of businesses which are just starting out. Even if your product or service is ready to go to market, building up a customer base under your own steam can take a very long time. NEDs can give you the opportunity to grab a share of the market without having to jump through all the hoops, making available an invaluable source of business contacts and giving you an important head start.

 Finding your ideal NED

If you would like to bring a non-executive director on board to help with the growth of your new business, you should consider your own strengths and weaknesses – this will help you to find someone who can balance things out and fill any gaps. The experience, independence, contacts and particular attributes of a NED can add the missing ingredients to your start-up or SME and help take you to the next level. Once you are ready to appoint a non-executive director, you can use a letter of appointment to clearly set out the terms. It’s worth noting that, although they are not employees, you are responsible for taxing their fees at source under PAYE. For further information on company directors, take a look at the Rocket Lawyer UK Quick Guides on appointing and removing directors and the role of a company director.

Pieta Das Gupta

Pieta has over ten years’ experience as a company commercial solicitor working in law firms and for businesses.As the Head of Legal for Rocket Lawyer UK, Pieta is in charge of legal content and work with the product development team to create the documents and guidance available on Rocket Lawyer.