What Makes A Director?

A tax case involving a husband and wife who paid themselves millions of pounds in dividends from 42 insolvent companies without making the necessary provisions for corporation tax has recently been heard by the Court of Appeal.

The companies are all in liquidation and one of the prime issues to be decided was whether the couple were or were not directors of the insolvent companies. Under UK law, the definition of a director of a company includes those whose decisions are acted upon as well as those who carry the formal title of director. It is therefore not necessary to be called a director to be a director in law. To answer that question, the Court asked whether the couple had ‘assumed the status and function’ of directors to an extent which would make them responsible under the Company Director Disqualification Act 1986.

The structure adopted was that the husband was a director of a company which was the sole director of the other companies. In these circumstances, ruled the Court, the directors of a corporate director ‘cannot by virtue of that fact alone be constituted de facto directors of the company’.

The material contained in this article is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

© , October 2009

Please contact:

Ian Baker

DD +44 (0)20 7553 6004

View profile »