When is a director not a director?

When is a director not a director?

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Client has issued business cards to his 'Operations Director' stating the said title.

The only problem is, is that he is not officially a director of the company and the MD has no intention of making him one!

Is there a restriction on the term 'director' as I would certainly find it misleading?

Replies (22)

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By thisistibi
07th Jun 2011 10:38

No restriction

Your job title can be "Director" without being a company director.  They are not necessarily linked.  The job title of "Director" is common in professional service organisations and does not denote being a company director.

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By accountant78
07th Jun 2011 10:47

Thanks for this

Yes I was aware of 'directors' in the large accountancy firms but thought there may have been an issue where a limited company was concerned.

Thanks for the clarification.

 

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By taxhound
07th Jun 2011 12:14

responsibilities

If someone is held out to be a director - ie by giving them the title of director, even if this is not registered at Co House, then I think they can be held responsible as a full director if it was not clear that they were not really such. So I wouldn't take that title on lightly.

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By adam.arca
07th Jun 2011 13:20

Not linked

I stand to be corrected but my understanding is the two "sides" of the equation aren't linked. The Companies House side of things is only a notification issue (notwithstanding that it happens to be a legal requirement) and not part of the process in appointing a company director.

In other words, you can be a director even if Companies House haven't been notified or even, but more unlikely, not be a director even if Companies House has somehow erroneously been so notified.

If your client is holding out this chap to be a director, then the law would probably deem him to be a director with all the rights and responsibilities which follow. In particular, he could very well be able to bind the company to a contract because the other party believed him to be a director.

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By Roland195
07th Jun 2011 13:26

I agree

Under company law, this "Operations Director" will be regarded as a duly appointed director with all the resulting rights and responsibilities. 

I assume this may be the usual case of your client not quite understanding the difference between a shareholder and a director but is something I would bring to their attention as if you don't and this guy ends binding the company to exchange all it's assets for magic beans it will no doubt be your fault.

 

   

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By Rachael-SimplifiedAccounting
07th Jun 2011 15:03

It is allowed BUT ..

... and as others have said, it is a big BUT.

It is perfectly allowable for someone to be called a director even if they are not appointed as one at Companies House.  However, the BUT part is that they will be considered to have the same roles and responsibilities as an appointed director and hence, as stated earlier, it is not something that should be done lightly.

I would bring this up with your client and the person involved as well ... they need to understand what they have agreed to. 

My question would be, if they are going to be called a director then why not make it formal and appoint them? 

As already said, is there some confusion between 'director' and 'shareholder'?

Rachael
www.simplified-accounting.co.uk

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David Winch
By David Winch
07th Jun 2011 20:35

And another thing . . .

Under the Company Directors Disqualification Act 1986 a person may be 'disqualified from acting as a director' but in fact the disqualification is wider-ranging than that since it provides "he shall not be a director of a company, act as receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company".

So it would obviously prevent someone from taking a senior management role in a company (whether or not he was called a "director").

David

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By thisistibi
08th Jun 2011 08:35

@davidwinch

But it seems he could still call him self a "Director" of a partnership.... albeit he would not have the protection of a limited company....

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By Richard Willis
08th Jun 2011 09:31

A representative of two very large (steel) companies

told me that simply because I used to sign company cheques I could be deemed to be a quasi director.  I found this hard to believe; is there any truth in it?  There must be thousands of secretairies, book keepers, etc. who act as second sigs simply because the banks insist on two!

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By thisistibi
08th Jun 2011 09:56

Law

s44 Companies Act 2006 says that a document (e.g. contract) is executed by a company are valid when signed by a director or secretary of a company, even if said signatory is NOT in fact a true director but is purporting to be one.  Or at least, that's how I read it.

s161 says that the acts of a company director are valid even if it is later discovered that said director was not validly appointed.

However, I cannot find any evidence that somebody purporting to be a company director assumes all the responsibilities of a company director.  I'd be delighted if someone could demonstrate where these provisions exist?

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
09th Jun 2011 14:57

Guide to directors' duties

Thanks to David Winch and thisistibi for their comments and legal references. If you'd like to carry on brushing up your knowledge of this topic, Jennifer Adams recently contributed a guide called Directors' duties: get the details right.

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By Hazel3rdi
10th Jun 2011 11:42

When is a director not a Director

One solution to this, used in many companies the world over, is to change the title to Director of Operations. Very slight change in wording, but significant change in meaning.

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Replying to Hazel3rdi:
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By EmmaHicks
28th Jul 2023 09:24

Could someone please elaborate on this point as I am interested to know the actual difference between a Director of Operations and a Operations Director. Does it come down to being held accountable or not for the company's debts or different tax implications for pay?

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Replying to EmmaHicks:
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By Mr_awol
28th Jul 2023 11:35

Old thread

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By richardterhorst
10th Jun 2011 12:07

Director as a title only? Be careful.

Having the title of director does not mean being a registered director and subject to the companies act. The title of director is common in marketing circles as it implies senior managment being applied to clients needs.

However it has it's problem. One can be classified as a shadw director and then the companies act does apply. One needs to look at the definition of shadow director to see if it does apply (e.g if the person advises the Board)

Secondly if not clear to a supplier that it's purely a title and the supplier then assumes (reasonably) that it is a director who can bind the company, the supplier can demand from the company to honour undertakings made. If a loss occurs the company and the perons can be jointly and severally be sued. Much case law in several jurisdictions on this.

So be careful calling yourself a director!

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By peter.bailey.thomson.com
10th Jun 2011 12:25

PB

I work in Company Law and am not aware that a partnership is an unregistered company: a general partnership under the Partnership Act 1890 is a relationship of persons carrying on business in common with a view of profit. A company, whether registered or unregistered, is a separate entity. The Companies Act 2006 s.1043 tells us that an unregistered company is a body corporate: which a general partnership certainly is not (a limited liability partnership is a body corporate under the LLP Act 2000 and so a separate entity).

There is a whole jurisprudence on "de facto directors". The Companies Act 2006, Insolvency Act 1986 and Company Directors Disqualification Act 1986 all describe (rather than define) a "director" as including "any person occupying the position of director, by whatever name called. So just calling a person "Sales Director" does not make that person a director. Similarly, although a person does not have the title "director" (and is not on the register of directors), that does not mean that he or she is not a director for legal purposes: if he or she occupies the position of director, that is enough. Many unscrupulous types deliberately do not have a formal appointment of director so as to avoid responsibilities/liabilities as directors, but have been held found by the courts to be directors and so e.g. subject to directors' duties (now codified in Part 10 of the Companies Act 2006), misfeasance, fraudulent or wrongful trading under the Insolvency Act 1986 and disqualification under the CDDA 1986. Note that a "shadow director" is a different creature, which is defined by those three Acts and made subject specific liabilities (such as wrongful trading) and may be disqualified.

The Supreme Court in HMRC v Paycheck Services 3 Ltd [2010] UKSC 51 late last year was asked to determine where a Mr Holland was a human director of Company A, and Company A was a corporate director of Company B (which had no human directors), whether Mr Holland was a de facto director of Company B. The majority of the court said that he was not (and so not liable for misfeasance) and that it was up to Parliament to legislate to change things as such an inroad into corporate personality. The minority judges pointed out that there wasn't much more that Mr Holland could have done to make himself director of Company B (e.g. signing off its accounts on behalf of Company A as Company B's director). These are difficult waters.

 

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By JohnBanfield
10th Jun 2011 21:05

Shadowy Charactor

 Under S251 of the Companies Act 2006, a "Shadow Director" means a person in accordance with whose directions or instructions the Directors of the Company are accustomed to act.

Therefore the old days of "Hey I'm not a Director" have long gone, and it does not matter what they call themselves anymore, if there is any wrong-doing then they can be punished as a Director.

On the subject of the CA 2006, obviously they won't be many out there who don't know the full 760 pages by heart, but being one of those I have manged to create a spreadsheet of it by headers and chapters, and is superb for browsing around it, and you can even click on the links and it will take you through to that part on the OPSI website, or you could just refer to the full pdf if you wanted to then.

Anybody wants it just email me - [email protected]

John

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By Bankrupted
16th May 2014 16:27

Man claimed to be director and lied to Court whilst doing so

Interesting thread.

I have been involved with Ian Richardson at Grant Thornton who has claimed in many documents both legal and otherwise that he is a "director of Grant Thornton UK LLP".  As a consequence of false statements he submitted to Milton Keyns County Court which you can read at

http://chelseapitchowners.org/grantthornton/

with further details at http://chelseapitchowners.org/richardsonliar.pdf

my colleagues queried whether he was a director and whether his fraudulent misrepresentation and libels bound the company.  Today he suddenly decides that "Please also note that I am an employee of Grant Thornton UK LLP, with the job title “director”. I have never been a member of the firm which is why my details are not registered at Companies House"    His USE OF BOLD CAPITAL IS HIS WAY OF EMBARRASSING ME DUE TO MY DISABILITY AND VIRTUAL BLINDNESS BROUGHT ON BY DETACHED RETINA AND HIGH BLOOD PRESSURE BLOWING THE VEINS BEHIND THE EYES/ 

Comments on the legality of Mr Richardsons claim and whether Grant Thornton's in house professional indemnity insurers will cover him would be appreciated.

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By Vicki Jones
05th Oct 2020 14:23

I am the owner and director of a company, my ex-husband works for the company due to marriage break-down and spinal surgery I have taken 18 months off work. In this time my ex-husband as gone onto Company House and made himself a director and he does not want be back in the workplace, can he do this?

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Replying to Vicki Jones:
paddle steamer
By DJKL
05th Oct 2020 14:32

You likely need a one to one meeting with a solicitor rather than an online chat with myriad accountants.

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Replying to Vicki Jones:
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By Paul Crowley
05th Oct 2020 14:39

A company cannot operate without an active director.
Who operated bank accounts and contracts?

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Replying to Vicki Jones:
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By Cheshire
05th Oct 2020 15:49

Vicki Jones wrote:

I am the owner and director of a company, my ex-husband works for the company due to marriage break-down and spinal surgery I have taken 18 months off work. In this time my ex-husband as gone onto Company House and made himself a director and he does not want be back in the workplace, can he do this?

which eejit gave him the Co. House login details?

You have clearly removed him now? Hopefully summarily dismissed him as well.

Sounds like you need drains up at the business, plus a solicitor. Not an Accounting forum that professionals use.

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