Key Takeaways
- A de facto director in UK law is any person who acts as a director without formal appointment but exercises real decision-making power within a business.
- Personal liability can arise for company debts or breach of statutory duty even if you never signed official director paperwork.
- The courts look at your actions and actual role, not your job title, when deciding if you are a de facto director.
- Regular involvement in director-level activities can make you subject to all obligations—fiduciary, statutory, and regulatory—under the Companies Act 2006.
- Ignoring risks linked to de facto directorship can result in civil, financial, and even criminal consequences, especially in insolvency situations.
- Strict time limits apply in director disqualification proceedings, requiring urgent response if you are notified or suspected to be at risk.
- Our firm is rated Excellent on Trustpilot with over 130 five-star reviews and a 4.9/5 rating from clients.
- The distinction between de facto and shadow directors is crucial: shadow directors direct or instruct behind the scenes, while de facto directors actively manage the company.
- Our solicitors can review your position and advise if your involvement makes you an unofficial director, helping limit potential legal exposure.
- If concerned about your legal status or duties as a de facto director, seeking specialist advice from our expert team can ensure you take practical steps to protect yourself.
For practical advice on de facto directorship or urgent risk assessment, contact our expert lawyers for a Free Consultation at 0207 459 4037.
Could You Be a De Facto Director Without Realising It? Legal Duties and Risks in UK Company Law
Many business founders, executives, and consultants are unaware that they can face the same personal liabilities as formally appointed directors. Regularly making strategic business decisions, signing contracts, or instructing staff often attracts director-level accountability—even if you have no official appointment. If you are in this position, failure to clarify your actual legal status could expose you to director disqualification, being sued personally for company debts, or criminal investigation.
Identifying whether you are a de facto director under UK law is essential. Our team can provide fast, confidential legal analysis if you are unsure or have been notified by a regulator.
What Is a De Facto Director in UK Law?
A de facto director is anyone who assumes the functions of a company director—setting strategy, managing operations, signing binding contracts—without a formal appointment at Companies House or in the company’s records. UK law defines a “director” as “any person occupying the position of director, by whatever name called” (Companies Act 2006, s.250). This broad approach lets the courts focus on substance over form.
If you suspect your work may have crossed into director-level decision making, you should promptly seek a risk assessment from our commercial litigation team.
How Can You Tell If Someone Is a De Facto Director?
Determining de facto director status relies on evidence of daily involvement in the company’s high-level affairs. Courts disregard paperwork in favour of actual conduct.
What Actions Make You a De Facto Director Without Appointment?
- Authorising or signing contracts for substantial sums (e.g. £10,000+)
- Approving large payments and company spending
- Attending and voting in board meetings
- Issuing staff instructions or final decisions on business operations
If unsure about your own position, our expert solicitors can review your role and provide tailored advice to limit your risk.
De Facto Director vs Shadow Director: What’s the Difference?
A shadow director “directs or instructs” those formally appointed, but does not act directly. A de facto director actively runs the business, making real decisions and leading operations.
- Shadow Director: Provides instructions followed by actual directors, works behind the scenes, but does not sign or act as a board member.
- De Facto Director: Is openly involved, sets strategy, presides over board-level decisions, and is treated as a director regardless of formal records.
For further reading, see our article on Shadow Directors in England and Wales: How to Identify, Avoid and Handle Legal Risks.
What Fiduciary and Statutory Duties Do De Facto Directors Owe?
If a court or regulator identifies you as a de facto director, you are fully responsible for director duties under both the Companies Act 2006 and the company’s articles. These include:
- Duty to promote the company’s success (s.172)
- Duty to exercise independent judgment (s.173)
- Duty to avoid conflicts of interest (s.175)
- Duty to act with reasonable skill, care, and diligence (s.174)
- Disclosure obligations regarding company transactions (s.177)
Our team can provide a detailed overview of director responsibilities and audit your day-to-day activities—ensuring you avoid inadvertent breaches. You may also find our guide on Directors’ Duties UK: Fiduciary Obligations & Breach under the Companies Act 2006 helpful.
What Are the Legal Risks and Liabilities for a De Facto Director?
De facto directors are fully liable to civil claims, regulatory fines, and (in some cases) criminal penalties. Risks include:
- Personal liability for company debts via wrongful or fraudulent trading, especially during insolvency under the Insolvency Act 1986.
- Being sued for breach of statutory duty, potentially resulting in damages running into tens or hundreds of thousands of pounds.
- Disqualification from acting as a director for up to 15 years under the Company Directors Disqualification Act 1986.
- Joint liability for unpaid tax, VAT, or PAYE to HMRC.
If you are concerned that your management role may expose you to directorship liability, speak to our experienced solicitors for urgent strategic guidance.
How Do the Courts Decide If You Are a De Facto Director?
The courts consider every aspect of your behaviour and actual role within the business, taking account of how you are perceived by colleagues, counterparties, and regulators. Judges look for evidence of “real influence” and management responsibility.
Key questions include:
- Did you regularly attend board meetings or approve major transactions?
- Did you sign contracts, cheques, or official documents for the company?
- Did employees, suppliers, or banks see you as part of the executive team?
- Were you described as a director in correspondence, or listed on external filings or investor documents?
For detailed assessment, our team can audit your actual responsibilities and recommend steps to protect your position.
What Evidence Do Judges Consider in De Facto Director Claims?
- Minutes of board meetings showing your input and voting patterns
- Written instructions or emails authorising key business decisions
- Bank or legal documents with your signature indicating director-level authority
- Testimony from staff or third parties describing your practical influence
- Company communications and filings naming you in a director-style capacity
If you are facing litigation or investigation, prompt evidence gathering is vital. Our specialist solicitors can step in on short notice.
What Laws and Deadlines Apply to De Facto Director Status?
Courts and regulators treat de facto directors under the same law as formally appointed directors:
- Companies Act 2006: Codifies directors’ duties and direct liability for breach.
- Insolvency Act 1986: Governs wrongful or fraudulent trading and director liability during company insolvency.
- Company Directors Disqualification Act 1986: Sets out grounds and procedures for director disqualification claims.
Our team can act the same day to secure your defence rights and respond to regulatory deadlines.
What Do the Courts Say About De Facto Directors?
Several key cases clarify how English law treats de facto directors:
| Case | Facts | Outcome | Why It Matters |
|---|---|---|---|
| Re Hydrodan (Corby) Ltd [1994] | Senior managers controlled the company without formal appointments | De facto directorship found | Sets out the test for de facto director status: focus on substance of conduct |
| Revenue and Customs Commissioners v Holland [2010] UKSC 51 | A manager ran company operations, not appointed as director | De facto director liability confirmed | Reinforces actual management control triggers liability |
| Gemma Ltd v Davies [2008] BCC 812 | Unappointed manager exercised board-level control | Classed as de facto director | Establishes ongoing involvement can create personal legal risk |
| Secretary of State v Chohan [2013] EWHC 680 | Adviser directed company policy | Disqualified as a de facto director | “Adviser” label offers no safe harbour when power is exercised |
| Moss v KDP Ireland Ltd [2023] EWHC 1575 | Unappointed manager controlled financial policy | Classed as de facto director | Confirms risks extend beyond insolvency and formal title |
Understanding the real-life consequences of these cases helps you make informed decisions about your own conduct within a business.
How to Avoid Unintentionally Becoming a De Facto Director
Proactive risk management can greatly reduce the chances of being classed as a de facto director.
Practical Steps to Protect Yourself and Limit Exposure
- Ensure your engagement contract clearly outlines limits to your authority.
- Avoid signing company contracts, cheques, or authorising significant payments unless formally appointed.
- Politely decline invitations to board meetings, especially where voting rights are involved.
- Use job titles and signatures that accurately convey your consultancy or advisory capacity.
- Keep email records and evidence distinguishing your role as non-managerial.
Concerned about your current role? Our fixed-fee reviews can clarify your risk exposure and give you peace of mind.
What to Do If Identified as a De Facto Director: Urgent Steps
If you receive notification or suspect you have been classed as a de facto director (by HMRC, a liquidator, or the Insolvency Service), time is of the essence.
Step-by-Step Guide for Responding to Allegations
- Seek immediate legal advice. Do not give written or verbal admissions before speaking to a solicitor.
- Gather all relevant documentation: contracts, correspondence, board minutes, and meeting records.
- Clarify your actual role and responsibilities, identifying when and how you performed each function.
- Reply to formal notices within the required deadlines, preserving all legal rights.
- Consider whether to negotiate undertakings or settlements to minimise penalties.
- Prepare robust evidence of your exact position and decision-making scope to challenge any wrongful claims.
If proceedings are underway, our expert lawyers can provide urgent representation, including out-of-hours WhatsApp support and rapid response on defence strategy.
Our Winning Approach to De Facto Director Cases
Our litigation team is recognised for leading expertise, offering:
- Fast-turnaround, fixed-fee legal risk assessments if you are worried about being a de facto director.
- Strategic analysis of your role using secure client document transfer.
- WhatsApp and direct phone access to experienced solicitors at every stage.
- Skilled negotiations with liquidators, regulators, or the Insolvency Service aimed at reducing penalties and avoiding personal claims.
- Guidance in preparing and submitting undertakings or defence evidence.
- Flexible payment options, including no-win-no-fee and retainers tailored to director defence.
To see how our five-star Trustpilot rating reflects our results, contact our commercial litigation team for a confidential consultation.
Frequently Asked Questions
Can a de facto director be disqualified from acting as a director in future?
Yes. Courts have the power to disqualify anyone—including de facto directors—for misconduct, breach of duty, or unlawful trading under the Company Directors Disqualification Act 1986.
Does being a company secretary or adviser make you a de facto director?
Not automatically. However, where your actions involve management decisions (such as signing contracts or authorising payments) you can be treated as a de facto director.
What’s the difference between a de facto and a non-executive director?
A non-executive director is formally appointed and listed on Companies House; a de facto director acts as a director in practice but is not recorded officially. Both have identical statutory duties once their role is established.
Can I resign from a role that might make me a de facto director?
Yes, but it is essential to formally notify the company, confirm cessation of all director-style activities, and keep documentation proving your withdrawal from management.
Will Companies House list me as a de facto director?
No. Only formally appointed directors appear on Companies House. However, regulators and courts can investigate and impose liability on de facto directors regardless of public records.
Can a de facto director claim expenses or remuneration?
Only if the company and board expressly agree. Unauthorised claims may indicate you were acting as a director, potentially strengthening claims against you.
How do auditors and HMRC view de facto directorships?
Both focus on control, daily activities, and substance over form. During audit or investigation, your real management role is what counts.
What criminal penalties can result from acting as a de facto director?
Criminal penalties (fines and, in extreme cases, imprisonment) can arise from serious breaches, including fraudulent trading, health and safety violations, and other criminal offences.
Are family members at risk if they help manage a family business?
Yes, if family members are involved in major decisions or signatory powers, they risk being classed as de facto directors. Administrative or clerical help usually does not trigger liability.
Is there insurance that covers risks for de facto directors?
Some D&O (Directors & Officers) insurance covers de facto directors, but policy wording varies. Always check with a solicitor to ensure coverage extends to your specific situation.
Get Specialist Advice on De Facto Director Risks Today
Understanding whether your day-to-day role exposes you to director-level risks is critical. Acting like a director, even without formal appointment, can create personal liability for debts, tax, and regulatory claims in England & Wales. Small mistakes or delays can result in disqualification and reputation damage.
Our specialist solicitors can assess your risk, advise on protective steps, and represent you in urgent proceedings. Whether you need a confidential review, proactive planning, or active defence, our team is ready to help.
