What makes a director?

Multiple-choice questions. In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please reread the article before attempting the questions again.

Why does UK company law look at the substance of an individual's role rather than their formal title?

Because authority in organisations does not always match formal appointments

Because job titles are legally binding

Because companies rarely register their directors

Because only shareholders can appoint directors

Which of the following best describes a de facto director?

Someone appointed by Companies House

Someone who directs the company but holds no shares

Someone who advises the board but never attends meetings

Someone who performs functions normally carried out by a director

A shadow director is defined as

Someone whose directions the board follows

A senior employee with no decision-making authority

A director brought in in the event of insolvency

An external consultant

Which of the following is not listed as an indicator that someone may be a de facto or shadow director?

Holding more than 5 per cent of the company’s shares

Access to confidential financial information

Managing budgets or staffing

Involvement in strategy

De facto and shadow directors are subject to duties under which legislation?

Companies Act 2006

Insolvency Act 2003

Company Directors Disqualification Act 1986

Financial Services and Markets Act 2023

What type of claim may arise for a de facto or shadow director if they breach statutory duties?

They may be automatically removed from their job

They may have to compensate the company for losses or return benefits

They will face imprisonment

They lose their voting rights as shareholders

Which of the following statements is true? If a de facto or shadow director continues trading when they knew insolvency was unavoidable, they (a) could face a wrongful trading claim; (b) might have to contribute personally to the company's assets; (c) could face civil liability and criminal consequences

Statement C

Statement B

Statement A

All of the statements

Under the Company Directors Disqualification Act 1986, for how long can an individual be barred from acting as a director?

Up to 15 years

Up to 5 years

For life

Up to 10 years

What should advisers recommend if they encounter individuals who exert influence without having a formal appointment?

Formalising the director's role

All of the answers

Adjusting responsibilities

Obtaining legal guidance

Why is it important for accountants to identify de facto and shadow directors?

To mitigate fraud risk

To submit correct information to Companies House

To assign share ownership correctly

To determine who owes duties and who may face liability

1 Unit