are you a shadow director

Are You a Shadow Director?

So, what is a shadow director and how could it affect you in an insolvency situation? As described in the definitions of the Insolvency Act 1986, a shadow director is a person in accordance with whose directions or instructions the directors of the company are accustomed to act.

A recent story in the news covered the sentencing of a man seen as a shadow director. He received 50 weeks imprisonment suspended for two years and disqualification from being a director for eight years. As well as an order to pay prosecution costs of £2,000 for contravening an undertaking not to take part in the management of a limited company.

Whilst he had not been a registered director of any limited company after signing the undertaking, it was concluded he had in fact been acting as a shadow director.

So, what is a shadow director and how could it affect you in an insolvency situation?

As described in the definitions of the Insolvency Act 1986, a shadow director is a person in accordance with whose directions or instructions the directors of the company are accustomed to act.

In an insolvency situation, this distinction is important. A shadow director is considered to be just as accountable for the company as any formally appointed director.

If you think this describes your position within a company, you are equally as responsible as the formally appointed directors. You also have a duty to act in the best interest of the company at all times.

Bankrupts are not allowed to act as company directors, but if they’re acting as shadow directors they could fall foul of the law.

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