iNED Recruitment: Independent Non-Executive Director Search

Independent Directors, Formally Assessed

INED stands for independent non-executive director. An iNED (also written INED or i-NED) is a non-executive director who meets a formal independence test set by the governance code or regulatory framework that applies to the organisation, and who the board is therefore able to describe as independent. Not every non-executive director qualifies. A NED who was recently an executive of the company, who has a material business relationship with it, who represents a major shareholder or who has served on the board for many years may still sit on the board, but cannot normally be presented as independent.

NED Capital places iNEDs for FCA-regulated financial services firms, AIM and main market listed companies, PE-backed businesses, charities and other organisations where independence is a governance requirement rather than a nice-to-have. Searches are run by our senior search team, each with at least ten years in senior-level recruitment, under founder Adrian Lawrence FCA, a Fellow of the ICAEW. Formal independence assessment is a standard part of every iNED search we run.

This page covers what makes a director independent, when organisations need an iNED, how our search works and what iNEDs are typically paid. If you need a non-executive director without a formal independence requirement, our main non-executive director recruitment service is the better starting point.

Call 0203 137 2496 or email recruitment@nedcapital.co.uk to discuss an iNED appointment.

What Makes a Non-Executive Director Independent?

Independence is about judgement: whether a director is free from relationships or circumstances that could affect, or appear to affect, how they challenge management and represent the interests of the company as a whole. The test is applied by the board, but most boards apply it against a published standard.

For companies following the FRC UK Corporate Governance Code, provision 10 lists the circumstances that are likely to impair, or could appear to impair, a non-executive director’s independence. Broadly, these are where the director:

1. has been an employee of the company or group within the last five years;
2. has had a material business relationship with the company, directly or as a partner, shareholder, director or senior employee of a body that has one, within the last three years;
3. receives remuneration from the company beyond the director’s fee, participates in share option or performance-related pay schemes, or is a member of the company’s pension scheme;
4. has close family ties with the company’s advisers, directors or senior employees;
5. holds cross-directorships or has significant links with other directors through involvement in other companies or bodies;
6. represents a significant shareholder; or
7. has served on the board for more than nine years from the date of their first appointment.

Where one of these applies and the board still considers the director independent, the Code expects it to explain why. The QCA Corporate Governance Code, used by most AIM companies, takes a similar approach and expects boards to disclose which directors they consider independent and on what basis. Our guides to what makes a board truly independent in practice and board structure, composition and independence go into more detail.

iNED vs NED: The Difference

Every iNED is a NED, but not every NED is an iNED. The difference is independence status.

A NED is any director who is not part of the executive management team. They may or may not be independent. A former chief executive who moves to a non-executive role, an investor director appointed by a private equity house, or a founder’s long-standing adviser are all NEDs, but would not usually qualify as independent.

An iNED is a NED whom the board has assessed as independent under the applicable code or framework. That status has practical consequences: it counts towards board composition requirements, it determines who can sit on or chair the audit and remuneration committees in a listed company, and in regulated firms it shapes how the board demonstrates effective challenge to the regulator.

For a fuller explanation, see our articles on the difference between an independent and a non-executive director and independent vs affiliated NEDs.

When Do Organisations Need an iNED?

Listed companies. The FRC Code recommends that at least half the board, excluding the chair, should be non-executive directors the board considers independent, and that the chair should be independent on appointment. AIM companies following the QCA Code are expected to have at least two independent non-executive directors. Our listed company NED recruitment page covers these boards in more detail.

FCA and PRA regulated firms. Banks, insurers, investment managers, payment and e-money firms and other regulated businesses rely on independent non-executives to provide effective challenge. Under the Senior Managers and Certification Regime, some INED roles carry a Senior Manager Function and need regulatory approval before the person takes up the role. In larger firms these include the chair (SMF9), the chair of the risk committee (SMF10), the chair of the audit committee (SMF11), the chair of the remuneration committee (SMF12), the chair of the nomination committee (SMF13) and the senior independent director (SMF14). Which of these apply depends on the firm’s size and SMCR category, and INEDs without an SMF designation do not need approval but are still subject to the Conduct Rules. Our page on FCA SMCR INED appointments sets this out in full, and our sister brand SMF Capital handles executive Senior Manager appointments.

PE-backed businesses. Investors often require an independent director as a condition of investment, written into the shareholders’ agreement. In this context independence mainly means freedom from material ties to both the investor and management, so the independent director can act as a credible bridge between them. See our private equity NED recruitment service.

Charities, housing associations and the public sector. The Charity Governance Code, the Regulator of Social Housing’s governance standard and public sector codes all expect boards to include members free from conflicts, even where the term “iNED” is not used. Our trustee recruitment service covers charity boards.

Private and family companies. No code requires an iNED, but many owner-managed and family businesses appoint one to bring objective challenge, prepare for investment or plan succession. Our guide to why UK companies need independent non-executive directors explains the case.

The Senior Independent Director

Listed company boards following the FRC Code appoint one of their independent non-executives as senior independent director (SID). The SID acts as a sounding board for the chair, serves as an intermediary for other directors and shareholders, and leads the annual appraisal of the chair’s performance. In regulated firms the role may carry the SMF14 designation. Because the SID must be independent and carry the confidence of the board and investors, it is one of the hardest iNED roles to fill. Read more in what is a senior independent director, SMF14 senior independent director and how to appoint a senior independent director.

Our iNED Recruitment Process

1. Independence criteria agreed at brief stage. Before any sourcing starts, we confirm which standard applies to your board: the FRC Code, the QCA Code, SMCR, a sector code or a private company standard set out in your shareholders’ agreement. We also agree any specific relationships to exclude, such as particular investors, auditors or major customers.

2. Research and direct approach. We map the market for directors with the right sector, committee and regulatory experience and approach them directly, alongside candidates from our own network and the pooled C-suite networks of our sister brands across FD Capital Group.

3. Independence screening. Every candidate is screened against the agreed criteria before shortlisting. Former employment, material business relationships, shareholdings, cross-directorships, family connections and tenure on other boards are all identified and assessed. We do not leave the independence question for the client to discover later.

4. Regulatory pre-assessment. For appointments that need FCA or PRA approval, we carry out a preliminary fitness and propriety review covering regulatory history, financial soundness and references from regulated board roles before presenting candidates, so the application to the regulator is as straightforward as possible.

5. Shortlist and recommendation. You receive a shortlist of three to five candidates, each with a written independence assessment alongside their board record and fit with your brief. Shortlists typically follow within two to three weeks of an agreed brief. We then manage interviews, references and offer.

For a step-by-step view of a board search, see our guide to the NED recruitment process for chairs. If you already know you need an independent director and want to understand how we approach the wider market, our independent non-executive director recruitment page covers our sourcing in more depth.

iNED Fee Benchmarks

iNED fees are broadly in line with NED fees for equivalent organisations, with regulated firm roles typically higher to reflect SMCR accountability and the approval process. As an indicative guide: private companies £10,000–£35,000 a year; AIM-listed companies £35,000–£85,000; FCA-regulated investment managers £35,000–£95,000 for SMF-designated INED roles; and banks and dual-regulated firms £40,000–£100,000 or more, depending on balance sheet size and regulatory complexity. Committee chair and SID roles usually attract an additional fee.

Our NED salary guide and NED compensation benchmarking page give fuller figures. Independence also affects how a director can be paid: under the FRC Code, share options or performance-related pay can count against independence, so most iNEDs receive a fixed fee only.

Frequently Asked Questions

Can an iNED own shares in the company?
A modest shareholding does not automatically remove independence, but a significant holding, or representing a significant shareholder, will usually do so. See can non-executive directors be company shareholders.

How long can an iNED serve and remain independent?
Under the FRC Code, service of more than nine years from first appointment is a factor likely to impair independence. Many boards plan refreshment well before that point. Our article on typical NED term lengths explains the usual pattern of three-year terms.

Does a private company need an iNED?
There is no legal requirement, but investors often insist on one, and many boards find an independent voice valuable before a raise, sale or succession.

Do iNEDs have different legal duties?
No. Independent and non-independent directors owe the same duties under the Companies Act 2006, including the duty to promote the success of the company. Independence affects their role on the board, not their legal responsibilities.