When one company sought damages from another for introducing to it clients that eventually created losses, a crucial question for the court was whether the employee who had made the introductions was a director of the defendant company.

Had the employee been found to be a director, the claimant company would have pursued him personally for the losses it suffered.

The man had not been duly appointed as a director, but it was argued that he was a 'de facto' or 'shadow' director who was part of the overall system of governance of the company.

A director has rights and responsibilities significantly greater than those of an employee, and a person can be found to be a director in law, even if they have not been formally appointed, if their influence over the company is such that they are one of its 'guiding hands' and are accustomed to their decisions being followed.

Whether a person is deemed to be a shadow or de facto director will depend on the precise facts of the case.

In this instance, the Court of Appeal did not accept that the man was a director. The judgment included some interesting findings, one of which was that the mere fact that the man was consulted about 'directorial decisions' – i.e. on matters of great importance to the company – was not sufficient for him to be regarded as a de facto director of the company.

For advice on any issue relating to directors' rights and responsibilities, contact Roy Colaba on 0121 698 2231, email r.colaba@sydneymitchell.co.uk or fill in our online enquiry form.

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