Thursday 20 March 2008

England and Wales: The meaning of 'de facto' director

In Gemma Ltd (in liquidation) v Davies and another [2008] EWHC 546 (Ch), [2008] WLR (D) 89, the High Court explored the circumstances in which an individual would be regarded as a de facto director for the purposes of Section 212 of the Insolvency Act (1986). The judgment, which has not yet been published on BAILII, contains a useful overview of the authorities. The trial judge outlined several principles:

(1) It must be proved that the alleged de facto director performed functions that could only be discharged by a director.

(2) There is no need to prove that a de facto director was held out as a director.

(3) The director must have participated on an equal footing with the other directors and not in a subordinate role.

NB: The Companies Act (2006) does not contain a specific definition for de facto director. Section 250 does, however, define the term "director" (in such a way as to include de facto directors) and Section 251 defines the term "shadow director".

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