Non-executive directors and Section 250: are NEDs in scope?

What does the functional test ask about a NED?

It depends on what the NED does. That is the honest answer company secretaries and general counsel keep arriving at as 29 June 2026 approaches, and it is the right one.

Section 250(3) of the Crime and Policing Act 2026 defines a senior manager as an individual who plays a significant role in the making of decisions about how the whole or a substantial part of the activities of the body corporate or partnership are to be managed or organised, or in the managing or organising of the whole or a substantial part of those activities. The definition says nothing about executive or non-executive office. It asks the same question of a NED as of any executive.

A non-executive title is neither a shield nor a trigger. For some NEDs the answer is plainly no. For others it is plainly yes. The interesting cases sit between those poles, and that is where a deliberate, recorded assessment earns its keep.

This is general information, not legal advice. Consult a qualified solicitor or FCA-regulated compliance adviser for your firm's specific situation.

Does a NED who only attends board meetings fall within the test?

A non-executive who attends scheduled board meetings, reads the papers, votes, and exercises no operating authority is a weak candidate on the face of s.250(3). Voting at board level is participation in collective decision-making, but the statute asks about a significant role in managing or organising activities. A NED with no individual mandate, no executive responsibility, and no authority to direct any part of the business is not managing or organising anything in the sense the section describes.

That is not a fixed rule. The test is functional, and a board that hands substantial individual responsibility to a particular non-executive changes the picture. But the genuinely non-executive director whose work stays inside the boardroom is the clearest out-of-scope case there is.

The thing to get right is the record. Write down why the NED is out of scope, rather than letting the word "non-executive" do the work unexamined.

What about a NED who chairs the risk or audit committee?

A non-executive who chairs the risk committee or the audit committee is a much stronger candidate. A committee chair sets the agenda, directs the scrutiny, and in practice shapes how a substantial part of the firm's control framework runs. That looks a lot more like organising a substantial part of the firm's activities than passive board attendance does.

These roles already carry individual regulatory accountability under SM&CR. Chair-of-committee positions of this kind are typically Senior Management Functions, meaning the individual requires FCA pre-approval before acting. That existing approval status is a signal the regulator already treats them as significant. It makes the s.250(3) analysis more important to record, not less, because the firm should be able to show it asked whether that significance carries into the broader functional test.

Is a NED on a subsidiary board in an operating capacity in scope?

The case that most often catches firms out is the parent-company non-executive who sits on a subsidiary board in a role that is, in substance, operational. Chairing the subsidiary. Sitting on its investment or credit committee. Exercising real authority over how that entity runs.

Section 250 applies to each body corporate and partnership, so the question is asked entity by entity. A person who is genuinely non-executive at group level can still play a significant role in a substantial part of a subsidiary's activities, and so be a senior manager of that subsidiary under s.250(3).

This is where a register-only analysis falls apart. The FCA Register records regulated functions, not the operating reality of every entity in a group. Working through s.250 entity by entity is the only way to catch the subsidiary seat that the register never shows.

How do the FCA senior management functions overlap with Section 250?

The SM&CR position is worth stating precisely, because it gets misstated often. Not every non-executive director holds a Senior Management Function. Under the Senior Managers Regime, a NED requires FCA pre-approval only where the role they hold is a designated Senior Management Function — such as chairing the governing body or a board committee, or acting as senior independent director. A standard, unattached NED holds no such function.

So the overlap with Section 250 is only partial. The chair functions are both SM&CR-approved and strong s.250 candidates, so they show up on both lists. The gap runs the other way too. A NED in an operating role at a subsidiary, or a NED handed substantial individual responsibility, can meet s.250(3) without holding any designated function, and so never appears on the register for it.

Is the Senior Independent Director a senior manager under Section 250?

The Senior Independent Director (SID) deserves its own treatment. The SID provides a sounding board for the chair, leads the non-executives in evaluating the chair, and acts as an alternative point of contact for shareholders. Real responsibilities, and where the role is a designated Senior Management Function it carries FCA pre-approval. But they are largely governance and oversight functions rather than the managing or organising of a substantial part of the firm's activities.

The SID is a genuine borderline case, and the verdict turns on what the particular SID actually does. The discipline is the same one you apply everywhere else: run the functional test, write down the reasoning, attach a confidence level. Don't reach for a default answer just because the role has a familiar name.

What should a firm document for each NED?

For each non-executive, record four things: the entity or entities the NED serves, the actual scope of the role (board attendance only, committee chair, subsidiary operating seat), the s.250(3) verdict, and a confidence level of High, Medium or Low. For the borderline cases, the SID, the committee chair, the group NED with a subsidiary seat, the reasoning is the part that earns its place. It shows a later reviewer that the firm engaged with the real difficulty instead of applying a blanket rule.

In practice this drops into the same workflow as the rest of the firm: a gap analysis across every individual, a declaration cycle to the people whose status needs confirming, and a board evidence pack built to stand up as a record of how each call was made.

There is a neat symmetry worth noticing. Non-executive directors are the people the evidence pack is presented to. A board that has run the Section 250 test on its own non-executive members tends to ask sharper questions of the firm-wide analysis it then signs off, and leaves a more defensible record for it.

Related articles

Sources

• Crime and Policing Act 2026, s.250www.legislation.gov.uk/ukpga/2026/20/section/250
• FCA — Senior Managers and Certification Regimewww.fca.org.uk/firms/senior-managers-certification-regime
• FCA Handbook — SYSC (governance)www.handbook.fca.org.uk/handbook/SYSC/
• FCA Registerregister.fca.org.uk/