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What is a company director?

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Introduction

The position of Director arises from the incorporation of a Limited liability company. When a company is incorporated the shareholder(s) must appoint Directors. The Articles of Association sets out the rules that determine how a Director has to operate.

The Director(s) runs the company. They are the individuals that operate and control the company on a day-to-day basis. In the case of many companies which are owner-managed, the Directors and the shareholders are the same people.

It is often thought that a Director is someone who is recorded at Companies House as a Director. However, as we shall see like so many things when assessed legally the position may not necessarily be clear cut. It is crucial to consider what someone has done as opposed to what their title happens to be. If you pull the strings then it might not matter what your job title happens to be.

There are some job titles that cannot depend on what someone does because they are so unique that the person with the official title is the only one that could hold such a position. An example might be a person appointed Prime Minister. In the case of a Director, a person can be a Director if they act as one without being registered as one.

What Is A De Facto Company Director?

An official (De Jure) Director is by far the most common type of Director. This is the Director who is formally recorded in the company’s books and records as a Director. He or she must be registered at Companies House as a Director with the date of their appointment and any subsequent resignation (if applicable).

An official Director has a unique position that there can be no dispute, absent fraud or mistake, that he or she is a Director.

What Is An Official (De Jure) Director?

A De Facto Director is a person who acts as if they are an official Director but who has not been properly appointed. To be a De Facto Director a person needs to do the things that only a Director would have done. So it is not sufficient for a person to have been involved in the management of a company but that will depend upon the nature of the relevant company.

In the case of Manolete Partners Plc v Dalal & Ors [2022] EWHC 1597 (Ch) the following was summarised as a relevant consideration for determining if someone was a De Facto Director:

There is no single test that applies to determine if someone is a de facto director. All relevant factors must be taken into account. The Court should look at all the circumstances in the round. Factors that may be relevant include whether the individual is accountable to others for what they do, whether they are treated as being on equal footing with the registered directors, and whether the individual is called a director, or held out to third parties as a director, or treated by third parties as a director. A single act outside the period when the person is alleged to have acted as director may throw light on whether they acted as director in the relevant period.

What Is A Shadow Director?

A Shadow Director is a person who the officially appointed Directors are in effect instructed by. A Shadow Director is defined in Section 251 of the Companies Act 2006:

In the Companies Acts “shadow director”, in relation to a company, means a person in accordance with whose directions or instructions the directors of the company are accustomed to act.

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