A Scottish court has spelled out a warning for non-executive directors (NEDs) who are of the view that they are in some way different from ‘normal’ directors in the eyes of the law.

In the case in point, a NED was held to be in breach of his fiduciary duty to the company that employed him when he gave the benefit of an agreement to another company of which he was also a director by, in effect, diverting the company of which he was a NED from entering into a potentially profitable memorandum of understanding with another company. His argument – that his non-executive directorship was undertaken for tax purposes only and that he would not be expected as a NED to identify business opportunities for the company – was rejected by the court.

“A director is a director,” says Kelly Hodson. “A NED owes exactly the same responsibilities to the company as a full-time working director.”

Contact us if you require advice on your role as a director.

July 2008