- Created by: Freya Lindsey
- Created on: 03-01-18 16:03
The Companies Act 2006 does not provide the definition of a director. Rather, it states who is included within the office of director with section 250 of the CA 2006, providing that a director 'includes any person occupying the position of director, by whatever name called.'
This definition covers people who have been appointed as director in law (de jure). It also covers people who have not been validly appointed but who act as directors (de facto). De facto directors, although not validly appointed, are therefore subject to the relevant provisions governing directors within the Act.
Section 155(1) of the CA 2006 provides that a director can be a natural or legal person, but that every company must have at least one director that is a natural person.
Shadow Directors (Section 251, CA 2006)
A person who has neither been appointed as a director, nor acted as a director, may still be treated as a director if they are 'a person in accordance with whose directions or instructions the directors of the company are accustomed to act'. (CA 2006, section 251(1)). This does not include those acting within a professional capacity (section 251(2)). Such a person is known as a 'shadow director'.
Not all provisions of the CA 2006 will apply to shadow directors. The CA will often expressly state whether a particular duty is/is not imposed on shadow directors.
In practice, determining whether someone is a shadow director can be difficult. Accordingly, in Secretary of State for Trade and Industry v Deverell and Ultraframe (UK) Ltd v Fielding, the courts sought to establish guidance on determining a shadow director. This is as follows:
1. It is not necessary for the shadow director to give directions/instructions over the whole field of the company's activities.
2. Whether a communication amounts to a direction/instruction is to be determined objectively.
3. Advice of a non-professional nature can amount to a direction/instruction.
4. It is not necessary to show that the de jure directors acted in a subserviant manner.
5. It is not sufficient to show that some of the de jure directors followed the directions. It must be shown that the majority of the board were accustomed to following the directions.
6. A person who initially gives instructions cannot be a shadow director as this will mean that the board is not accustomed to receiving instructions from this person.
7. The mere giving of instructions is not sufficient - it must also be shown that the directors act on such directions/instructions.
Appointment (Section 154)
Every private company must have at least one director and every public company must have at least two directors (section 154). The proposed directors will become successful directors upon incorporation. Once this has happened, the power to appoint directors can be found in the articles. If the articles are silent on this issue, the power to appoint directors is vested in the members (Worcester Corsetry Ltd v Witting). The power to appoint…