BoardroomIn a recent case, Smithton Ltd v Naggar [2014] EWHC 680 Ch, the Court of Appeal reconsidered the difference between de facto and shadow directors.

A de facto director is a person who performs the functions of a director but who has not been formally appointed as such (s250 Companies Act 2006 (“CA 2006”)). Whereas, a shadow director is a person in accordance with whose directions or instructions the directors of the company are accustomed to act (s251(1) CA 2006).

Smithton Ltd (the “Company”) claimed for loss suffered after two of its clients became insolvent and defaulted under their contracts. Both of these clients were introduced to the Company by Mr Naggar, who was a director of the holding company, Dawnay Day International Limited. The Company claimed that Mr Naggar was either a de facto or a shadow director and had breached his statutory duties towards the Company, in particular, his obligations to disclose conflicts when he had introduced the two clients.
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