Straight answer
What a non-executive director does for an SME in 2026
What does a non-executive director do for a small or medium-sized business?
A non-executive director sits on the board without running the business day to day. They challenge the plan, test the numbers, hold management to account, bring networks and experience, and help with fundraising, risk and succession. Legally they are a director like any other and carry the same statutory duties under the Companies Act 2006.
Last reviewed 11 September 2026. Written by Steph Hamill, HAM Agency.
What a good NED does in an SME
- Tests the strategy and the plan, and asks the question nobody in the business will
- Reads the numbers and spots the trend before it becomes a problem
- Holds management to what they said they would do
- Opens doors: customers, partners, investors, hires
- Chairs or sits on committees as the company grows: audit, remuneration, risk
- Brings experience of what happens next, whether a raise, an exit, a crisis or a new market
- Mentors the founder without taking over
The legal duties
GOV.UK sets out the general duties every director has under the Companies Act 2006. They apply to non-executives as fully as to executives:
- Follow the company's constitution
- Promote the success of the company, having regard to employees, business relationships, the community, reputation and fairness between members
- Exercise independent judgement
- Exercise reasonable care, skill and diligence
- Avoid conflicts of interest
- Not accept benefits from third parties
- Declare any interest in a proposed transaction
GOV.UK also notes that the duties apply even if a director is not active in the role, or if someone else tells them what to do.
NED or adviser
| Non-executive director | Adviser or advisory board member | |
|---|---|---|
| Appointed to the board | Yes | No |
| Registered at Companies House | Yes, and must verify identity | No |
| Votes on board decisions | Yes | No |
| Statutory duties | Yes | No |
| Personal risk | Yes, so insurance matters | Limited, set by contract |
| Best for | Governance, investor confidence, hard challenge | Specialist input, networks, lighter commitment |
When to appoint one
- You are raising and investors want independent oversight
- The founders make every decision and nobody checks them
- You are entering a new market, sector or scale you have not handled before
- A family business or family office needs someone outside the family in the room
- The business is stuck and needs a straight view from someone with nothing to lose by giving it
How to appoint well
- Write a role description: what you need from them in the next two years
- Look for fit with the gap on the board, not a famous name
- Agree a letter of appointment: term, time, pay, conflicts, confidentiality
- Arrange directors' and officers' insurance
- Set a board calendar, with papers sent in good time
- Run a proper induction: numbers, people, customers, risks
- Make sure they verify their identity with Companies House
- Review the board's performance once a year
How HAM helps
HAM provides non-executive and advisory seats, and sets up boards and committees, through Board and advisory. Take the discovery quiz to see whether a board seat or an advisory role fits.
Questions
Is a non-executive director liable like other directors?
Yes. Company law does not have a lighter category of director. A NED carries the same general duties, which is why directors' and officers' insurance and proper board papers matter.
What is the difference between a NED and an adviser?
A NED is appointed to the board, registered at Companies House, votes and carries directors' duties. An adviser has no vote, no statutory duties and no formal authority.
Does an SME have to follow the UK Corporate Governance Code?
No. The Code applies to certain listed companies, not to private SMEs. SMEs can borrow its principles without being bound by it.
Should a NED be paid in shares or bonuses?
Think carefully. The FRC's guidance notes that pay linked to performance measures can weaken a NED's ability to challenge management.
Practices
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Practice
Board and advisory