What Are the Legal Duties of a Non-Executive Director in the UK?

By Adrian Lawrence FCA, founder of NED Capital · Part of the Board Governance Hub

A common misconception is that a non-executive director carries lighter legal responsibilities than an executive because they are not involved in day-to-day management. That is not how UK company law works. A non-executive director is a director in the full legal sense, and owes the company the same statutory duties as any other director. Understanding those duties — and the standard against which a NED’s conduct is judged — is essential for anyone taking or holding a board seat.

This guide sets out the seven statutory duties, explains how the standard of care applies specifically to non-executive directors, and covers the liability that can follow a breach.

The Seven Statutory Duties (Companies Act 2006, ss171–177)

The general duties of all directors are codified in the Companies Act 2006. They apply to every director of a UK company — executive and non-executive, of listed and private companies alike — and they are owed to the company itself.

1. Duty to act within powers (s171). A director must act in accordance with the company’s constitution and exercise powers only for the purposes for which they were conferred.

2. Duty to promote the success of the company (s172). A director must act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole — having regard to the long-term consequences, the interests of employees, relationships with suppliers and customers, the impact on the community and environment, and the company’s reputation. This is the duty that embeds stakeholder considerations into UK directors’ obligations.

3. Duty to exercise independent judgement (s173). A director must not fetter their discretion or simply follow the will of others — a duty that speaks directly to the independence at the heart of the non-executive role.

4. Duty to exercise reasonable care, skill and diligence (s174). The duty that matters most for how a NED’s conduct is judged — examined in detail below.

5. Duty to avoid conflicts of interest (s175). A director must avoid situations in which they have, or may have, a direct or indirect interest that conflicts with the company’s — particularly relevant to NEDs, who often hold several board and advisory roles.

6. Duty not to accept benefits from third parties (s176). A director must not accept a benefit conferred by reason of being a director or of doing (or not doing) anything as a director.

7. Duty to declare interest in a proposed transaction (s177). A director must declare to the other directors the nature and extent of any interest in a proposed transaction or arrangement with the company.

The Key Point: Same Duties, but the Standard of Care Is Calibrated

Here is where the non-executive dimension actually bites, and it is the part most generic accounts miss. The seven duties are identical for all directors — but the fourth, the duty of reasonable care, skill and diligence under section 174, is applied through a test that has two limbs. It measures a director against the care that would be exercised by a reasonably diligent person with, first, the general knowledge, skill and experience reasonably expected of someone carrying out that director’s functions (the objective limb), and second, the general knowledge, skill and experience that the particular director actually has (the subjective limb).

The practical consequence for a non-executive is twofold. Because the objective limb is set by reference to the NED’s functions, a NED is not expected to have the same day-to-day operational knowledge as an executive — the standard reflects the part-time, oversight nature of the role. But the subjective limb means a NED cannot hide behind that: a director brought on precisely for their financial, legal or sector expertise will be judged against that expertise, and a chartered accountant on an audit committee is expected to apply an accountant’s understanding to the numbers. The law has also made clear that a non-executive cannot be merely ornamental. The case of Equitable Life Assurance Society v Bowley confirmed that NEDs cannot be passive bystanders — they must acquire and maintain a sufficient understanding of the company’s business to discharge their oversight duties, and must apply the knowledge and experience they have. “I was only a non-executive” is not a defence.

Liability: What Can Go Wrong

Because a NED owes the full statutory duties, a NED can face personal liability for breaching them. Beyond the general duties, two areas carry particular exposure. Under the Insolvency Act 1986, a director — executive or non-executive — can be liable for wrongful trading if they allowed the company to continue incurring debts when they knew, or ought to have concluded, that there was no reasonable prospect of avoiding insolvent liquidation. And directors can face disqualification under the Company Directors Disqualification Act 1986 for conduct making them unfit. These are not remote risks: NEDs of failed companies have been pursued, disqualified and held liable, which is precisely why the oversight role must be taken seriously rather than treated as honorary.

The Protections Available

The law also provides protections. A company may indemnify directors against certain liabilities, within statutory limits — it cannot, for example, indemnify against liability to the company itself or against fines. Directors’ and officers’ (D&O) liability insurance is standard and important: any NED should confirm that adequate D&O cover is in place before accepting an appointment, and understand its scope. And under section 1157 of the Companies Act 2006, a court has discretion to relieve a director from liability where they acted honestly and reasonably and ought fairly to be excused. None of these removes the underlying duties — they mitigate the consequences of an honest, reasonable mistake, not a failure to engage.

The Regulatory Overlay for Financial Services

For non-executives of FCA or PRA-regulated firms, the general duties are only the baseline. The Senior Managers and Certification Regime imposes an additional layer of personal regulatory accountability on those holding senior management functions — including certain NED roles such as the chair, the senior independent director, and the chairs of the audit, risk and remuneration committees. A NED in a regulated firm therefore carries both the Companies Act duties and specific regulatory responsibilities, with personal consequences for failure. This is specialist territory, and one where the right appointment matters a great deal.

Understanding these duties is part of taking a board seat responsibly — and appointing directors who understand them is part of building a board that governs well. At NED Capital we appoint non-executive directors who take their legal responsibilities seriously and have the expertise to discharge them, and every search is led personally by Adrian Lawrence FCA, a Fellow of the ICAEW and former listed-company finance director. To discuss an appointment, our NED recruitment service is the place to start, and our guide to corporate governance sets out the wider framework. This article is general information, not legal advice.

NED Capital | Sister practice of FD Capital | ICAEW practising certificate held by Adrian Lawrence FCA. This article is general information, not legal advice.