In the day-to-day running of a company, businesses are often overseen by individuals who are not legal directors registered at Companies House.
However, those who undertake such roles should be aware that the law may treat them as directors even if they are not legally registered. This has important consequences, as such individuals are exposing themselves to personal liability (both civil and criminal) for their acts or omissions in directing the company.
The law categorises three types of director:
a de jure director – is registered at Companies House (including alternate directors whose appointment should normally be registered at Companies House)
a shadow director – is defined by the Companies Act as ‘any person in accordance with whose directions or instructions the directors of a company are accustomed to act’ (section 251 CA 2006)
a de facto director – is ‘any person occupying the position of director, by whatever name called’ (section 250 CA 2006). This could, for example, include invalidly appointed directors.
The Court of Appeal in the recent case of Smithton Limited v Naggar, issued guidance on how to determine whether a person is a de facto or shadow director. The case considered whether a director of a holding company had become a director of its subsidiary – a question which often arises in practice. It is important for group companies and their directors to understand when liability as a de facto or a shadow director may arise. Although in law such an assessment will always be a question of fact and degree in every case, the decision does provide some insight into what practical points a court would take into account, for instance:
whether the person had assumed the status and function of a director so as to make himself responsible as if he were a director. The question whether or not he acted as a director is to be determined objectively and irrespective of the director’s motivation or belief – so:
did the company consider the person to be a director and held him out as such?
did third parties consider him to be a director?
the fact that a person is consulted about directorial decisions, or his approval is sought, does not in general make him a director because he is not making the decisions.
Many corporate structures will have individuals who exert influence but are not registered as directors at Companies House, particularly if they are owners, and it can therefore be worth remembering the obligations and risks that they expose themselves to if they do act in such a way.
A recent CIPD Health and Wellbeing at work survey has reported that most organisations are taking additional measures to support employee health and wellbeing, in response to COVID-19. Three quarters…
This September brings change to the use of standard contractual clauses (SCCs) governing data transfers from the EU and EEA. In June this year, the European Commission published two sets…
Our legal experts have been busy sharing valuable expertise in their first series of free webinars for employers, and businesses across the county who missed the live events can now…
Our website uses cookies to improve your experience while you navigate through our website. Out of these cookies, the cookies that are categorised as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyse and understand how you use our website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies but it may affect your browsing experience on our website. You can find our cookie policy here.
Necessary cookies are absolutely essential for our website to function and enable core functionality such as security and accessibility. These cookies do not store any personal information. You can block these cookies by changing your browser settings, but this may affect how the website functions.
We use performance cookies such as Google Analytics to help us count the number of visitors and to see how visitors move around our website when they are using it. This helps us to improve the way our website works, for example, by ensuring that users are finding what they are looking for easily. The cookies collect information in a way that does not directly identify anyone. For more information on how these cookies work, please see our cookie policy.
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Cookie
Duration
Description
__cf_bm
30 minutes
This cookie, set by Cloudflare, is used to support Cloudflare Bot Management.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Cookie
Duration
Description
_ga
2 years
The _ga cookie, installed by Google Analytics, calculates visitor, session and campaign data and also keeps track of site usage for the site's analytics report. The cookie stores information anonymously and assigns a randomly generated number to recognize unique visitors.
_gat_UA-562889-3
1 minute
A variation of the _gat cookie set by Google Analytics and Google Tag Manager to allow website owners to track visitor behaviour and measure site performance. The pattern element in the name contains the unique identity number of the account or website it relates to.
_gid
1 day
Installed by Google Analytics, _gid cookie stores information on how visitors use a website, while also creating an analytics report of the website's performance. Some of the data that are collected include the number of visitors, their source, and the pages they visit anonymously.
vuid
2 years
Vimeo installs this cookie to collect tracking information by setting a unique ID to embed videos to the website.
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.