Corporate Directors and Shadow Directors
The implementation of the Small Business, Enterprise & Employment Act 2015 (the “Act”) introduces changes affecting directors & their duties. This blog will cover the types of directors affected by the new Act and the consequences for companies & directors of non-compliance with the law.
What are Corporate Directors & Shadow Directors?
A corporate director is defined as a director who is not a natural or real person, but is instead a company. All corporate directors are going to be prohibited. It will be an offence to breach this provision and any appointment of a corporate director will automatically be void. At the time of writing, this provision is intended to come into force by October 2016.
The definition of a shadow director has been amended by section 90 of the Act. This expands the definition set out in the Companies Act 2006 by making it clear that directions or instructions given in the exercise of a function conferred by or under legislation is not sufficient to meet the definition of a shadow director. An example of this would be when legal or accountancy advice was given. Shadow directors now have the same duties as appointed directors as a result of the Act. These provisions came into force on 26th May 2015.
What does this mean for my business?
Companies need to ensure that there are no corporate directors up to a year after the initial implementation date of 1st October 2015 when shadow directors will have the same duties as appointed directors. If companies have failed to comply, they will be classed as committing an offence. A shadow director may be unknowingly personally liable if in breach of his or her extended director’s duties.
Reviewing the registered directors of the company and determining if any directors are classed as corporate directors.
Determining if any persons are acting as shadow directors and considering the implications of this.
Ensuring the provisions in respect of corporate directors have been complied with by 1st October 2016.
How rradar can help: