Practical Considerations When Appointing Independent Non‑Executive Directors in a Group Structure

The introduction of the King V Code has renewed focus on the role and effectiveness of independent non‑executive directors (INEDs), particularly within complex group structures. As organisations adapt to the updated governance framework, boards are being challenged to think more carefully about how independence is defined, assessed and sustained across multiple entities. Within a group structure, achieving independence can be challenging in practice. Directors may have relationships with parent companies, subsidiaries, shared service entities or significant shareholders that, while lawful, may compromise their perceived objectivity. King V reinforces a substance‑over‑form approach, emphasising that independence should be judged not only against technical criteria, but also on whether a reasonably informed outsider would regard the director’s judgement as free from undue influence. A key practical issue is whether INEDs should serve on more than one board within the same group. While this can improve oversight and alignment, it also increases the risk that directors become too embedded in group strategy or management thinking. Boards must therefore balance efficiency with genuine independence, ensuring that each governing body remains capable of providing robust challenge and oversight appropriate to its mandate. Practical constraints, including time demands and access to information, are further considerations. INEDs in group structures often face significant demands, particularly where reporting is heavily consolidated. To support effective decision‑making, boards should ensure that directors receive clear, entity‑specific information and that delegation of authority frameworks are well defined and consistently applied. Regular and transparent independence assessments are essential. These should consider not only formal relationships, but also tenure, conduct, and evolving circumstances within the group. Clear disclosure of how independence is evaluated supports credibility and stakeholder confidence. Ultimately, King V positions independent non‑executive directors as central to achieving ethical leadership and sound governance outcomes. In group structures, thoughtful appointment practices and ongoing evaluation are critical to ensuring that independence remains real, effective and value‑enhancing rather than merely symbolic.