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board are accustomed to following. This includes disqualified directors (who may still hold sway at senior level and influence the decisions being made), major creditors (who can make decisions about the company’s future, withhold finance and even dictate policy), majority shareholders (who could terminate the office of directors by way of an ordinary resolution) and advisers and consultants.
This distinction is important, as sections of the Insolvency Act 1986 refer to ‘directors and shadow directors’. Section 214 is an example; it deals with wrongful trading, and a shadow director – as defined above – could be found liable to make an unlimited contribution towards an insolvent corporate estate where they were a person whose instructions were liable to be followed.
De facto directors are directors ‘in fact’. This means that they may not be entered on the ‘Register of Directors’ at Companies House, but in fact they are still directors, because they are ‘holding themselves out to be’ or allowing themselves to be ‘held out’ in this way.
A person can ‘hold themselves out to the world as being a director by:
A ‘de facto’ director can then be seen and treated as a director and be accountable in the same way as can a ‘legally appointed’ director. For example, being ordered to make a personal contribution towards the estate of an insolvent company.
De jure director. This means, a director ‘in law’. This type of director has their details added to the Register of Directors at Companies House.
A non-executive director is one who sits on some board meetings and offers advice and expertise as a result of their personal, financial and commercial experience. They are usually not part of the decision making process and so will usually not be pursued by insolvency professionals as ‘directors’ or ‘shadow directors’.
