Can you call someone a director without legal appointment?

Can you call someone a director without legal appointment?

​If one of your senior employees has "director" in their job title but they aren't legally appointed as a director of your company, is that a lawful practice and what might the consequences be?

​Directors in name alone?

​It's not uncommon for those occupying senior roles to be given a job title that includes the word "director" when they aren't actually a registered director of the company, e.g. IT Director. They are effectively a director in name alone. Whilst legally you can put "director" in someone's job title even though they aren't a registered director, it may have serious legal implications. On the face of it, such individuals don't owe the same duties or have the same responsibilities as registered directors, but that may not always be the case.

​Appointing a new director

​A registered director is one who is registered at Companies House. The appointment of directors will usually be covered by the company's Articles of Association which may provide for appointment by the board of directors or by the shareholders via an ordinary resolution. In any case, the new director must have consented to act as a director and must be eligible to do so. You must then (1) update the company register of directors with the new director's information (and update the company's persons with significant control register if they qualify); and (2) officially register the new director at Companies House within 14 days of the appointment using Form AP01.

​Tip. Form AP01 can be filed electronically , or you can send it by post.

​De facto directors

​Whilst it may be lawful to name someone as a director when they haven't been legally appointed, if they are deemed in the eyes of the law to be a "de facto director" then they can be subject to the same statutory and fiduciary duties, and the same potential civil and criminal penalties, as registered directors. The Companies Act 2006 and the Insolvency Act 1986 both also cover de facto directors, i.e. individuals who act as directors even if not legally appointed. Determining whether someone is a de facto director is fact specific. You should ask such questions as: What is their actual role in the company? Have they assumed responsibility to act as a director? Has the company and other third parties considered them to be a director, e.g. they attend board meetings, sign contracts on the company's behalf, etc.? Have they made significant business decisions? Note also that the use of "director" in their job title isn't actually essential, as it's the role rather than the title that determines whether someone is a de facto director.

​Tip. It's possible for someone to have "director" in their job title without being a de facto director.

​Trap. Conversely, someone with "director" in their job title but who isn't a registered director might find that they are still treated in law as if they were. This could also mean you are bound by and liable for their actions and decisions.

​Tip. Avoid using "director" unless the person is a registered director. An alternative title could be "Head of [Department]". If you do use "director" internally, clearly define the person's duties, powers and responsibilities and the scope of their authority, e.g. they must always act only on instructions from the registered directors. Also, make the scope of their authority clear to clients.

​It's lawful to call someone a director when they haven't been legally appointed. However, doing so carries risk. If they are held out and treated as a director and act like one, they may be deemed to be a de facto director and be liable for breaches of directors' duties just like a registered director. You may also be bound by the de facto director's decisions.