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Small Business, Enterprise and Employment Act 2015

Shadow directors

Section 89: Application of directors’ general duties to shadow directors

602.The general duties of directors are set out in sections 170 to 177 of the CA 2006 and are based on common law rules and equitable principles. They set out how directors are expected to behave.

603.At present the general duties of directors can only apply to shadow directors in the same way as the corresponding common law rules and equitable principles can. In future, the starting point for shadow directors will be that the general duties apply to them unless they are not capable of applying (removing the current restriction). This is achieved by replacing section 170(5) of the CA 2006. This change in default position is neither intended to preclude the courts from looking at the application of the duties on a case by case basis, nor from drawing on existing case law in any given case.

604.Subsection (3) gives the Secretary of State the power to make regulations directly applying or disapplying one or several of the general duties to shadow directors with or without modification, to facilitate their application to shadow directors. The power is subject to the affirmative procedure.

Section 90: Shadow directors: definition

605.This section amends the CA 2006, Insolvency Act 1986, and the Company Directors Disqualification Act 1986 to refine the definition of a shadow director.

606.It makes clear that where advice, guidance, directions or instructions are given in exercise of a function conferred by or under legislation, including legislation made by the Devolved Administrations, the definition of shadow director will not be met. To achieve this, it amends the definition of “enactment” in the CA 2006 to refer to legislation made in Wales. It also sets out that a Minister of the Crown acting in their official capacity will not be considered a shadow director when issuing advice or guidance.

Section 91: Shadow directors: provision for Northern Ireland

607.This section inserts the new definition of shadow director inserted by section 90 into the Insolvency (Northern Ireland) Order 1989, and the Companies Directors Disqualification (Northern Ireland) Order 2002. This ensures consistent treatment of shadow directors in Northern Ireland, England, Wales and Scotland.

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