Board advisor or non-executive director: which one do you need?
A non-executive director is a director in law, with a vote on the board and the general duties in sections 171 to 177 of the Companies Act 2006. A board advisor is not a director, has no vote and owes none of those duties, unless the board starts acting on their instructions, at which point they can become a shadow director. Early-stage companies usually need an advisor, or a fractional executive in the seat that is struggling, before they need a NED.
The legal difference
A NED is appointed to the board, registered at Companies House and bound by the general duties every director owes: to act within the company's powers (section 171), to promote its success (172), to exercise independent judgement (173), to exercise reasonable care, skill and diligence (174), to avoid conflicts of interest (175), not to accept benefits from third parties (176) and to declare an interest in a proposed transaction (177). They vote, they sign off the accounts, and they can be disqualified.
An advisor holds a contract, not an office. They give advice and the board decides whether to take it. The line that matters is section 251: a shadow director is a person in accordance with whose directions or instructions the directors are accustomed to act. Advice given in a professional capacity is excluded, but an advisor whose word the board routinely follows, who negotiates for the company or who is treated as the real decision maker can be found to be a shadow director, and the general duties then apply to them as far as they are capable of applying.
How each is paid
A NED is paid a fixed annual fee as an office holder, normally through payroll, and the published fee surveys give the figures: £76,868, £58,000, £40,500 as average or median base fees across the quoted-company tiers on the fee page. Private companies pay less, and some pay partly in options.
A board advisor is paid however the agreement says, and there is no published UK survey of advisor pay to quote. The usual forms are share options, a modest monthly retainer, a fee per session, or nothing for an advisor who is also an investor. Advisors are not employees, so they generally cannot hold EMI options; unapproved options or shares are the usual equity route, and the tax treatment is worth taking advice on before anything is granted.
A fractional executive is paid a day rate for the days worked, £600 to £1,500 across the UK seats, invoiced like any other supplier.
Advisor, NED and fractional executive side by side
| Board advisor | Non-executive director | Fractional executive | |
|---|---|---|---|
| Legal status | Contractor, not a director | Director and office holder | Contractor, or executive director if appointed |
| Vote on the board | No | Yes | Only if appointed to the board |
| Companies Act duties, ss171 to 177 | None, unless a shadow director (s251) | All of them | All of them if appointed; otherwise none |
| Runs a function | No | No | Yes |
| Typical time | A few hours a month | 25 to 35 days a year listed, 12 to 24 private | One to three days a week |
| Pay | No published survey | £40,500 to £76,868 a year, published quoted-company base fees | £600 to £1,500 a day across the UK seats |
| Paid through | Contract: options, retainer or per session | Payroll, as an office holder | Invoice |
Which one a company actually needs
- An advisor, when the founder needs a sounding board on one subject, such as a first enterprise sale, a fundraise or a technical choice, and nobody needs to be accountable for the answer.
- A NED, when somebody outside the executive team needs to hold it to account: an investor has asked for an independent director, the company is preparing for a sale or a listing, or the board agrees with itself too easily.
- A fractional executive, when the problem is that a function is not being run. Advice on the finance function does not produce a forecast, and a NED overseeing a finance function that does not exist has nothing to oversee. A fractional CFO two days a week does the work, and the board then has something to govern.
When an advisor should become a NED, or step back
An advisor who has started attending every board meeting, steering decisions and speaking for the company to investors is doing a director's job without a director's protections or accountability. The honest fixes are to appoint them to the board, with a letter of appointment, a fee and D&O cover, or to bring the role back to advice. Leaving it in between is how shadow directorships happen.
Common questions
Do board advisors get paid in the UK?
Usually, though not always in cash. Share options, a small monthly retainer or a fee per session are the common forms, and an advisor who is also an investor is often unpaid. No published UK survey covers advisor pay, so any precise market figure is a guess; what matters is that the agreement states the hours and the pay.
Can an advisor become a shadow director?
Yes. Under section 251 of the Companies Act 2006, a person whose directions or instructions the directors are accustomed to act on is a shadow director, and the general duties apply to them where they are capable of applying. Advice given in a professional capacity is excluded, so the risk arises when an advisor stops advising and starts directing.
What is a startup advisory board?
An informal group of advisors a startup asks for help, each usually on a short written agreement with options or a small fee. It has no legal standing, no vote and no duties; the real board still decides everything. It works best with a few people, each picked for one specific gap, rather than a list of names for the pitch deck.
Does a board advisor have legal duties?
Not a director's duties, unless they become a shadow director. They owe what their contract says, and a professional advisor owes the duty of care that comes with the profession. A NED, by contrast, owes every duty in sections 171 to 177 from the day of appointment.
Should a company hire an advisor, a NED or a fractional executive?
Ask what is missing. Advice on one subject: an advisor. Independent oversight of the executives: a NED. A function nobody is running: a fractional executive, one to three days a week. Most early-stage companies need the first or the third before the second.
Read next
More on non-executive directors
A board needs governing. A function needs running.
A non-executive director does the first. For the second, the bench lists verified fractional executives with the day rate on the profile, and retained search runs board and full-time appointments for the companies it works with.