Determining whether someone is a legally appointed director is straightforward in most UK companies, but confusion can arise when you hear the term ‘de jure company director’. What does it mean? Are all company directors de jure, or does the term only apply to executive and managing directors?
We explain what it means to be a de jure director, whether all types of directors are classified as such, and the difference between de jure and de facto directors.
De jure is the Latin expression for ‘by law’ or ‘by right’, which goes a small way to explaining the meaning of the term ‘de jure company director’.
Simply, a de jure director is a person who has been formally appointed to the board and registered as a director at Companies House in accordance with the Companies Act 2006 and the articles of association .
A de jure company director is sometimes informally referred to as a ‘registered director’, a ’director in law’, or a ‘true director’.
It is also possible to appoint a corporate body as a de jure director, provided that the necessary steps have been followed and the company also has at least one natural director.
That said, it should be noted that corporate directors have been outlawed and that this ban will soon be enforced with only limited exemptions. S o, i f you are appointing a corporate director, you should keep an eye out for these developments. To inform Companies House of the appointment of a corporate director after incorporation, the company must complete and file form AP02 rather than form AP01.
Since limited company directors are responsible for managing a company’s day-to-day affairs, they must adhere to various duties prescribed by (where applicable):
Under the Companies Act 2006 (sections 171 to 177), all directors must comply with the following seven general duties of directors :
Beyond these statutory duties, many companies also define directors’ collective or individual responsibilities and decision-making powers in shareholders’ agreements, members’ resolutions, service agreements or employment contracts.
Unlike a de jure director, a de facto director is not formally appointed to a company or registered at Companies House, but they perform many similar duties, such as signing contracts and making decisions on the company’s behalf.
Essentially, a de facto director assumes the status and duties of a director ‘in fact’, even though they have not been properly appointed as a director. As a result, they share the same duties and responsibilities as de jure directors.
Executive directors and managing directors are not formal terms defined in the Companies Act 2006. Often, though, companies will refer to certain directors under these terms .
An executive director is formally appointed by a company, sits on the board of directors, is responsible for some or all of the company’s day-to-day management activities and strategy, and is usually a full-time employee.
The managing director is often a senior director who takes on responsibility for managing the company ’ s activities and strategic direction on a full-time basis . In most cases, t hey will also be appointed as a statutory director and, therefore, would be considered de jure in this regard.
A non-executive director (NED) is a director with a particular expertise, who assists executive and managing directors with a specific area or challenge within the company by pr oviding independent oversight and constructive challenge.
They often work part-time in the role, so they don’t tend to oversee or assist with general day-to-day business activities. Nevertheless, non-executive directors are considered de jure because they are formally appointed and registered at Companies House.
They have the same legal duties and responsibilities as executive directors. Indeed, the law does not actually distinguish between ‘executive’ directors and ‘non-executive’ directors.
An alternate director is an individual who steps in to substitute for a director who will be incapacitated for a period of time (e.g., if they are unwell or on holiday). The alternate will act on the director’s behalf during their absence.
Alternate directors are considered de jure because they must be formally appointed to the company and registered at Companies House. However, the company’s articles of association must permit the use of alternate directors.
Section 251 of the Companies Act 2006 defines a shadow director as “a person in accordance with whose directions or instructions the directors of the company are accustomed to act.” However, unlike a de facto director, a shadow director does not perform those actions personally – rather, they exert influence and control over the board.
Some examples of a shadow director include:
In practice, a shadow director usually acts behind the scenes, often because something prevents their formal appointment as a company director.
A nominee director is a person nominated by a shareholder or other person or body to represent their interests on a company’s board of directors. They may be a de jure director or a de facto director, although they are most commonly the former.
An example of when a nominee director may be used is during a joint venture, where the shareholders of each party to the joint venture company appoint a nominee to represent them on the new company’s board of directors.
It all comes down to accountability. As we have seen, de facto directors and de jure directors are subject to the same legal duties and responsibilities. So, if things go wrong, they could be in trouble.
If the company is involved in any wrongdoing and the board of directors is found to have breached its duties, the de jure and de facto directors would be held responsible. In some cases, they can even be personally liable.
Further, if a court finds that shadow directors were in place, those individuals may be held liable for any wrongdoing they were involved in.
We hope you’ve found this post helpful. Please comment below if you have any questions, or get in touch if you need help appointing or removing a company director.
With our Director Appointment & Resignation Service (available for only £49.99), we will prepare the appointment letter and board resolution, and submit the necessary appointment documents to Companies House. This helps ensure any new director is de jure.