People who are not formally appointed as direcots, but act as a director by giving advice to directors can be classed as ‘shadow’ directors.

In the past, it was understood that shadow directors could be held liable for such things as wrongful trading (letting the company trade whilst insolvent) etc.  A shadow director was not expected to be responsible for fiduciary duties, promoting the success of the company etc.

However, in a recent case a shareholder was found to have been acting as a shadow director and was held responsible for fiduciary duties.

The shareholder of a company which was facing insolvency instructed the director to pay him monies for which no goods or services were provided.  The company subsequently went into liquidation.  During his investigations into the running of the company prior to liquidation, the insolvency practitioner deemed that the sheareholder had acted as a shadow director and sought to recover monies ffor the benefit of the creditors.

The High Court agreed and ruled that the shareholder had assumed responsibility for the company and was therefore be subject to fiduciary duties.  In addition the Court ruled that his actions prior to the liquidation removed assets which would otherwise have been available to the creditors.

It is important for anybody facing financial difficulties, whether personally, directors of limited companies or partnerships, to seek advice from a licensed insolvency practitioner as soon as possible.

To take advantage of our free consultation, please telephone Stella Flemmings on 01377 257788, 01724 230060 or 01904 520116 and she will make you an appointment with one of our insolvency professionals at one of our offices in Driffield, Scunthorpe or York.  Alternatively we can meet clients at their premises or those of their professional advisor.

Redman Nichols Butler has had an office in Driffield since 1996, an office in York since 2008 and an office in Scuthorpe since 2011.  Redman Nichols Butler specialises in advising directors of limited companies and individuals in East and North Yorkshire and North East Lincolnshire in all aspects of corporate and personal insolvency.