Home Knowledge Tips for Non-Executive Directors – Managing Personal Liability

Tips for Non-Executive Directors - Managing Personal Liability

May 1, 2013

The Institute of Chartered Secretaries and Administrators (ICSA) in the UK recently issued guidance for non-executive directors (NEDS) suggesting ways in which they can take steps to demonstrate to a regulator or the courts that they have taken appropriate steps to exercise care, skill and diligence in the exercise of their roles, thereby reducing their exposure to personal liability.

The guidance highlights areas of best practice both pre- and post-appointment to a board.

Prior to joining a board, NEDs should:

  • Carry out due diligence to satisfy themselves that the company is one in which they can have confidence and to which they can make a strong and value-added contribution
  • Ascertain the culture, value and behaviours associated with the particular board in order to satisfy themselves that they can uphold standards of integrity and probity
  • Understand that more is expected from a director with a specific skill or specific experience and devote time to refreshing these specific skills
  • Review their letter of appointment, in particular the minimum and additional time commitments, and raise any concerns before signing
  • Understand company law requirements in relation to conflicts of interest, and gifts and hospitality
  • Once appointed to a board, NEDs should make sure that they:
  • Contribute to the planning of their induction programme and take responsibility for their on-going training and continuous development
  • Ensure that they receive a schedule of future board and committee meetings and high-quality information sufficiently in advance of meetings
  • Provide independence, oversight and constructive challenge to the board
  • Make decisions objectively and in the interests of the company
  • Raise any concerns with the company’s executives at any time and take independent professional advice at the company’s expense, if they consider it necessary

To read a more detailed article on this topic, please click here.

Contributed by Susanne McMenamin.

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