Are you a de facto director?

13 July, 2016
by: Cripps Pemberton Greenish

It is possibleDirector to be a director of a company, even if you are not registered as a director at Companies House, if your involvement with a company is such that you are part of its corporate governing structure. This is of particular relevance when a company is insolvent, as the actions of a director (including a de facto[1] director) are likely to be scrutinised. I set out below several factors that are relevant when assessing whether or not you are a de facto director:

  1. The company refers to you as a director

Does the company you work for refer to you as a director? Review the company’s public material (such as websites or brochures), as well as your business card and email signature. Check your LinkedIn profile, as well as the company’s public profiles. Ask yourself: “would a third party consider you to be a director of the company as a result of the way the company portrays your position publicly?”

  1. Your title

The use of the word “director” in your title is not enough to prove you are a de facto director, although it will be relevant. Also, omitting “director” from your title will not necessarily prevent you from being considered a de facto director. It is necessary to demonstrate what you actually do for the company – do you exercise the powers and discharge the functions of a director? If yes, no matter what your title, you could be a de facto director.

  1. You make key decisions on behalf of the company

If you sign contracts on behalf of the company, including employment contracts and business contracts, and these contracts are of particular significance or value to the company, you may be a de facto director.

It is common ground that there is no single decisive test to determine whether or not an individual is a de factor director. All of the relevant circumstances must be taken into account. If you are concerned that you could be a de facto director, or would like more information about directors’ duties (especially if the solvency of your company is in question), please do contact me or Joanna Ford to discuss your options.

[1] existing or holding a specified position in fact but not necessarily by legal right.