de Facto Director in UK Law

In Fayers Legal Services Ltd v Day, ( unreported) 11 April 2001, a case relating to breach of fiduciary duty, Patten J, rejecting a claim that the defendant was a de facto director of the company and had been in breach of fiduciary duty, said that in order to make him liable for misfeasance as a de facto director the person must be part of the corporate governing structure, and the claimants had to prove that he assumed a role in the company sufficient to impose on him a fiduciary duty to the company and to make him responsible for the misuse of its assets.

It does not follow from the fact that he was taking all the relevant decisions that he was part of the corporate governance of the composite companies or that he assumed fiduciary duties in respect of them. If he was a de facto director of the composite companies simply because he was the guiding mind behind their sole corporate director, then that would be so in the case of every company with a sole corporate director.

Secondly, can the paragraphs which I have identified above support a case of de facto directorship against Sir David Barclay? The alleged sporadic involvement in the shape of giving instructions or guidance to the Barclay appointed directors is, in my view, incapable of amounting to his assumption of the role or responsibilities of a director such as to subject him to the full range of statutory and other duties attached to a de jure or de facto director.

There is ample evidence to show that he is, if not the controlling mind, then the person with primary control over the first defendant company. He has also been referred to as such in various reports in Indian newspapers which I have been shown, and he continued to be shown as a director notwithstanding his purported resignation in a report obtained in July of last year based on corporate documents which were available on the official website of the Ministry of Corporate Affairs in India.

(2) The purpose of the legislation is to identify those, other than professional advisers, with real influence in the corporate affairs of the company. (2) The purpose of the legislation is to identify those, other than professional advisers, with real influence in the corporate affairs of the company.

In my view such an owner may be a shadow director notwithstanding that he takes no steps to hide the part he plays in the affairs of the company. In my view such an owner may be a shadow director notwithstanding that he takes no steps to hide the part he plays in the affairs of the company.

Lord Collins sensibly held that there was no one definitive test for a de facto director. The question is whether he was part of the corporate governance system of the company and whether he assumed the status and function of a director so as to make himself responsible as if he were a director. However, a number of points arise out of Holland and the previous cases which are of general practical importance in determining who is a de facto director.