Directors, Shadow Directors 

and De Facto Directors

A surprising number of company litigation files involve the question as to whether someone is a director or not!

It should be simple! When a director is appointed, there is usually

• a written resolution or  appointment, …followed by …
• a notification to Companies House , which the director signs in order to signify his or her consent  to act

 

Director not notified to Companies House

Sometimes, a director is formally appointed but no-one has notified Companies House

The appointment will be valid, but such carelessness can cause problems and can attract a large fine

 

Often, we come across the following ….

Shadow director

A “shadow director”

• Is not a formally appointed director but ….
• Is a person who controls the board of directors of a company (or who act in accordance with his  directions)
• Usually denies that he is a director or that he is in such position of control.

If someone is proved to be a shadow director, he has all the liabilities of a director (e.g. can be made personally liable for the company’s debts in certain circumstances) but none of the rights (e.g. to see company papers)

 

 

De facto director

This is someone who is a not a director but goes around acting as if he is

Again, if someone is proved to be a de facto director, he has all the liabilities of a director (e.g. can be made personally liable for the company’s debts in certain circumstances) but none of the rights (e.g. to see company papers)

 

"Do you really want to become a director?  "

Sometimes, someone is asked to become a director and they ask our advice as to whether they should

The position of director is virtually all potential liability and there are not a lot of advantages, especially if you are just one of many directors and can get out voted

If the company is badly run, there are internal or external problems and the company is perhaps insolvent, then this could be a very expensive and stressful move ..even if it is nice to hold yourself out as a Company Director

 

Call, to set up a fixed fee meeting

• one of our Company Law Team

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• 0845 270 2511

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