Frequently Asked Questions

First Flight conducted a major survey of Non-Executive Directors of approx 500 Non-Executive Directors in unquoted, AIM and PLUS companies. This survey, which was featured by the FT, is unique and contains a great deal of fascinating information on the role of Non-Executive Directors and anwers many questions that we frequently get asked. It is also the first time that a major survey has been undertaken in this sector; when candidates register on our web site they will be sent an electronic copy of the 20 page survey; if you would like a hard copy please let us know.

Frequently Asked Questions: (FAQs):

        A. General

        B. Non-Executive Directors

        C. Management Buy-Ins (MBIs)

 A. General

1. What are First Flight Placements' products or services?

First Flight (Placements) Ltd is a specialist Non-Executive Director and Management Buy-In resource.  We have three products or services:

  • Providing Non-Executive Directors
  • Providing Non-Executive Directors who sometimes become shareholders
  • Management Buy-Ins/Company acquisitions - where owners wish to retire and we put together an MBI or BIMBO team (incl Non Execs) to acquire the company


2. How do I register?

  • On our web site: http://www.ffplacements.co.uk/ or www.NonExecutiveDirector.co.uk
  • Go to the drop down box on the top right of the Home Page: "Candidates" and then "Register CV" and complete the process.
  • You will be asked for a password and can pick one of your choice so when you return to the web site, at any time, you can log in by entering your email address and password which will allow you to browse our opportunities or apply for specific roles.
  • We also have a "Change Password" button.
  • You will be asked a few questions so we can understand what sort of opportunity you are looking for.
  • You will be asked for a copy of your CV.
  • You can also go to "Update Details" if you wish to put a revised CV in or change what you are looking for. If you wish to delete your details please send us an email.

3.    Are my details secure if I register with First Flight?

  • At no time and on no account will First Flight allow anyone else access to our database or to your details.
  • We will also never send your details to 3rd parties without your written (email) authority.
  • You can at any time alter or remove your details.

4.    Why do I need to sign Self Cert and NDA forms?

  • If you are interested in receiving Business Plans on First Flight projects (and regular updates on the roles we have), we do require you to sign either a Self-Certification Statement or High Net Worth/Sophisticated Investor forms in order to comply with the current Financial Services and Markets Act (Financial Promotion) Order 2005 (FSA) legislation plus our Confidentiality/NDA form.
  • The Self-Certification Statement and High Net Worth/Sophisticated Investor forms are produced by the FSA not by First Flight.
  • First Flight sign Confidentiality/NDA forms with all of our clients and we do not send any details out on our client's activities without receiving these forms back from potential candidates.
  • These forms are generic and apply to all our Non Exec roles and we file the forms and nothing else is done with them. You will not be asked to re-sign these forms unless the FSA alter their forms or we update our NDA form.

B. Non-Executive Directors

1.    What is a Non-Executive Director?

  • Non-Executive Director, Non Exec, NXD - it has several nomenclature but they are one and the same.
  • A Non-Executive Director is a part time or non executive role as opposed to the normal executive roles within a company such as Managing Director, Sales Director etc which are full time roles.
  • Part time or Non Executive does not reduce the importance or downplay how crucial a Non-Executive Director can and should be to a company and its Board.
  • All Directors are equal and Company Law does not differentiate between Executive and Non Executive Director functions.    
  • Non-Executive Directors do not ordinarily get involved in day-to-day management and there will be no reporting lines within a company to a Non Exec.
  • More information on the role of a Non Exec can be found on the FF web site if you click on: Non-Executive Directors and see the drop down boxes.

2.    Why do companies want Non-Executive Directors?

  • Government-led reviews in the last 3-4 years were the pre-cursor of the Corporate Governance Code (used to be called the Combined Code) click here:  Combined Code June 2008 (417kb)
  • You will see that the Code has as one of its main stipulations the recruitment of at least two Non-Executive Directors for every board.  According to the Association of Chartered Accountants the mid size sector is estimated to comprise 4,300 private companies, of which less than 20% have to date recruited NEDs. For businesses with between 200 & 400 employees the proportion rises to 50%.
  • Companies at all stages - start-up, early stage, mature and listed can derive considerable benefit from having a Non-Executive Director on their Board.
  • Although Non-Executive Directors have not been widely used by owner managed business and Small Medium Enterprises (SMEs) a Non-Executive Director has a key part to play and provides a resource that such companies would not otherwise be able to afford.
  • A Non-Executive Director is an inexpensive resource compared to Executives, Consultants and Professional advisors.
  • More often than not early stage companies struggle to gain funding due to the lack of credibility in their management team and we can address this shortcoming.
  • First Flight very much operate on the credo that successful companies are 85% good management and 15% good idea and that the appointment of one or two Non Execs add considerably to good management.

More information on why companies benefit from appointing a Non Exec can be found on the FF web site if you click on: Non-Executive Directors and see the drop down boxes.

3.    What are the key skills of a Non-Executive Director?

  • To strengthen the Management Team and The Balance Sheet (when they become a shareholder).
  • To be involved in the creation of the company's robust and defensible Business Plan, policies and strategy.
  • To possess substantial and successful business experience ideally in a similar business sector.
  • To possess vision and be able to apply creative thought to the business.
  • To review plans and budgets which will implement policy and strategy.
  • To be a confidential sounding board for the MD/CEO and keep the focus of the MD/CEO.
  • To provide outside experience of the workings of other companies and industries.
  • To provide contacts with third parties such as financial providers, grant availability, potential clients etc.
  • To be able to support the MD; act as a mentor and a "Wise Owl" while remaining independent.

More information on the key skills of a Non Exec can be found on the FF web site if you click on: Non-Executive Directors and see the drop down boxes.

4.    What is the time commitment for a Non-Executive Director?

  • A Non-Executive Director will, as a minimum, expect to attend a Company's monthly or bi-monthly Board meeting.
  • The average time commitment for a Non-Executive Director in a Small and Medium Sized Enterprise (SME) is 18 days a year.
  • Additional time can be spent on introducing contacts or potential clients, with funding providers, discussing strategy and key decisions and on PR activity.

5.    What can a Non-Executive Director expect to earn?

  • First Flight research indicates that daily rates for Non Execs vary enormously but the average daily rate is £500 a day for companies with less than £3m turnover, £750 a day for those with £3-10m turnover rising to £1,100 per day for larger companies.
  • In start-up or early stage companies it is not uncommon for little or no fees to be paid, but rolled up into sweet equity, until the company is cash positive, profitable or achieve their funding target.

6.    Why do some Non Exec roles have shareholding opportunities?

  • With most SME companies the existing Directors are usually also shareholders and the appointment of a Non-Executive Director often requires them to become shareholders too in order to align their interests with the existing Directors.
  • These companies look for strategic input first and foremost but in some cases they also want the Non Exec to become a shareholder with some investment iro £50-100k (after the usual due diligence), so the two requirements go hand in hand.
  • Having Non Execs with some "skin" in the game is beneficial, an indication of commitment and helps to protect the IPR.
  • First Flight's research indicates that an equity stake is an important consideration for many potential Non Execs as they believe that they will help the company gain success and that they should be rewarded in the form of gains from shares owned.
  • A minority of potential Non Execs strongly opposes the acquiring or holding of shares by Non Execs on the basis that it compromises independence but the more general view is that shares can be helpful in aligning the interests of the Non Exec with the long-term interests of shareholders. It is undesirable, however, for a Non Exec's shareholdings to represent a large proportion of the individual Non Exec's financial wealth.
  • We conclude that there is merit in the practice of companies giving their Non-Executive Directors the opportunity to take part of their remuneration in the form of shares.

7.    What is the Higgs Report?

  • Government led reviews over the last few years, like the Higgs Review produced by Sir Derek Higgs in 2003, were the precursor of the Corporate Governance Code which has as one of its main stipulations (para A.3.2.) that "a smaller company should have at least two independent Non-Executive Directors".

    Corporate Governance Code (used to be called the Combined Code) click here:  Combined Code June 2008 (417kb)

  • The Higgs Review is often misunderstood and it is important to understand that he was only asked to address corporate governance in the big, listed and quoted companies.
  • There is a lot in the report that should be of interest to the owner-managed business and the report did say that smaller businesses don't realise how much a Non Exec can add to the capability of the team, the quality and robustness of the decision taking and the strength of the right Non Exec's connections - in other words they just don't appreciate what great value a Non Exec can be.
  • The report commented on the need for Non-Executive Directors to be independent although independence itself is a quality that is difficult to pin down and surprisingly difficult to define. Many people believe that independence dictates that Non Execs should not be shareholders but Higgs commented that this was relevant in quoted companies not smaller companies.

Sir Derek Higgs in his 2003 Higgs review highlights the contribution of Non-Executive Directors in four key areas:

1.      Strategy: Non Execs should constructively challenge and contribute to the development of the company's strategy.

2.      Performance: Non Execs should scrutinise the performance of the company's management in meeting agreed goals and objectives and monitor the reporting of performance.

3.      Risk: Non Execs should satisfy themselves that the company's financial information is accurate and that financial controls and systems of risk management are robust and defensible.

4.      People: Non Execs are responsible for determining appropriate levels of remuneration of Executive Directors and have a prime role in appointing, and where necessary removing, senior management and in succession planning.

8.    What is Directors' & Officers (D&O) insurance?

  • First Flight research indicates that only 50% of companies have D&O insurance which is worrying in view of the increasing risks that Directors face.
  • First Flight strongly recommend that all Directors - Executive and Non-Executive should review these risks and that companies should accept responsibility for the provision of adequate cover.
  • D&O insurance will offer some peace of mind to the Non-Executive Director if the company gets into trouble.

C. Management Buy-Ins (MBIs)

1.    How does First Flight operate with their Management Buy-in (MBI) and Company sale activities?

  • First Flight have been changing and evolving the way we operate with MBI/BIMBOs/Company acquisitions and now have Chris Steel and David Fawcus to handle our projects.
  • We act for purchasers and look for interesting businesses that are scalable and sustainable in the £1m-6m transaction range.
  • We visit potential businesses for sale and assess whether the price expectation of the owners is realistic and whether the price is, most importantly, fundable (meaning: Equity + Debt + Earn-Out or Deferred = Likely Price) what the likely structure is and whether we like the business.  If it fulfils our criteria we will take the project on but if it doesn't we don't get involved.
  • This is a much more focussed approach bringing a higher % success and one that we hope will distance our modus operandi on company sales from Company Brokers.
  • We assist the purchasers with the negotiations, the structure of the deal and helping to arrange debt funding.  We can also bring in additional members for an MBI team as required.
  • The vendors will have their own advisors.
  • Our objective is to find good business opportunities that are realistically priced and ideally with one or two existing members of the company's Management team participating to make it a BIMBO (Buy-In Management Buy Out) project which are preferred by debt funders.

2.    If we are interested in selling our business, how can First Flight help?

  • We would like to meet with you to discuss your requirements and if you want to proceed we can recommend a specialist advisor who would act for you and "groom" the business for sale, agree a realistic price and produce an Information Memorandum.
  • We would look to put together several potential MBI teams who would be interested to acquire the business with the right skills and funding and we would act for the purchasers.

3.    If I am interested in a Management Buy-In/Company acquisition how do I proceed?

  • As mentioned above, with MBI projects, we act for the purchasers not the vendors and as such take a fee from the purchasers for assisting with the negotiations, the structure of the deal, providing Corporate Finance Advice and helping arrange the debt funding etc.  
  • We require an MBI Agreement form to be signed on each MBI project as they are all different depending on the size.   

 

If you have any questions that are not answered here, please email: info@ffplacements.co.uk