Quasi directors - in deeper than you realise?

You may step up as a director for a variety of reasons and not realise that you are deemed a quasi director with all the responsibilities of statutory directors.

What if you advise the company directors on what to do? What if you attend board meetings? What if you represent a corporate shareholder in discussions? But what you may not realise is that in stepping up you are at risk of falling into the grey area of ‘quasi-director’. This may be bad news as if you are found to be a quasi-director you could be held responsible for your actions as if you were a company director but have no protection or recourse to funds to solve the problem.

Types of ‘quasi-director’

There are several scenarios where someone assisting the directors may be seen as a quasi director and held to account as a company director. Some are more obvious than others.

What's the role of a Non-executive director?

An independent adviser who usually devotes only part of their time to the affairs of the company but is neither a formal director nor an employee of the company.

Non-executive directors are treated as directors so owe fiduciary duties to the company. However, the steps that they will be expected to take to fulfil their duty to exercise reasonable care, skill and diligence will vary. Where a non-executive director has specialist knowledge, they will be subject to a higher threshold.

At a minimum, a non executive director must take reasonable steps to put himself in a position to guide and monitor the management of the company.

Shadow directors are quasi directors

If the company directors act in accordance with your instructions you will likely be a shadow director. A shadow director owes the same general duties and responsibilities as an appointed company director.

This position arises by circumstance so a majority shareholder, management consultant or director of another group company may not be aware that they are in fact acting as a shadow director.

‘I didn’t know I was acting as a director’

Unfortunately you will not avoid liability even if you genuinely believed you were not acting as a company director.

However, the court will often take into account the governance structure and circumstances of the company, so your actions will be considered in their context.

Does giving a director advice always mean I will have director’s liabilities?

No, the fact that a person is consulted about board decisions does not in general make them a director because they are not making the decisions – this is still done independently by the board.

When will a ‘quasi-director’ be held liable?

Unless you are merely an observer, many of the risks that are faced by statutory directors are also risks for quasi-directors. Risk areas include:

• Fraudulent or wrongful trading;
• Director disqualification; and
• Asset freezing claims.

Quasi-directors can also be subject to claims of unfair prejudice by minority shareholders. There can also be liability under personal guarantees.

If you feel as though you may have fallen into the trap of quasi-director and are now responsible for liabilities you didn’t know you had, come and speak to us. We can guide you through a number of difficult situations. You can reach us on 0207 438 1060.