The role of a Non-Executive Director (NED) is often viewed as the ideal boardroom position: strategic influence, independent oversight, and none of the day-to-day operational responsibility carried by executive directors. Yet headlines, regulatory action, and insolvency claims have created a growing perception that NEDs are increasingly exposed to personal liability whenever a business gets into trouble. So how much of that risk is real?
The answer lies somewhere between perception and reality. There is no doubt that NEDs have significant legal duties. They are expected to challenge management, understand the financial position of the business, identify risks, and act in the interests of the company. A passive approach is unlikely to provide protection if a company later fails. However, recent case law demonstrates that courts are careful not to impose liability simply because an individual holds the title of non-executive director.
A good example is Garden House Software Ltd v Marsh & Ors [2026] EWHC 2184 (Ch). In that case, claims were brought against three non-executive directors arising from the transfer of valuable intellectual property within a group structure. The claimant alleged that the NEDs were liable as de facto or shadow directors and had either participated in wrongdoing or failed to prevent it. After a three-week High Court trial, the claims against the non-executive directors were dismissed in full. The court found they were not de facto directors of the operating company, had not acted dishonestly, had not participated in any conspiracy, and had not turned a blind eye to alleged wrongdoing. The case is a useful reminder that while NEDs face scrutiny, the courts will look carefully at the reality of their involvement rather than assuming liability because they sat on the board.
The lesson for NEDs is clear. The role is not ceremonial, and genuine responsibilities come with the title. But neither are NEDs automatically liable whenever a company encounters difficulties. Those who maintain independence, ask difficult questions, understand the business, and properly document their oversight have a strong foundation on which to defend their position if challenged. Ultimately, the greatest risk is not being a Non-Executive Director. It is accepting the role without understanding the responsibilities that come with it. The Garden House case shows that diligent NEDs should not be deterred by exaggerated fears, but they should never underestimate the importance of active and informed governance
If you are a NED and have any concerns, get in touch.
