One area that causes confusion with limited companies, is the people assigned to work within the business structure and the roles that they must play to help achieve success for the company. In this post, we’re going to look at the company director and focus on a specific term sometimes used to describe this officer: ‘de jure’. Let’s get started.
De jure company directors explained
De jure is the Latin expression for ‘by law’ or ‘by right’, and this goes a small way to explaining what a de jure director is.
A de jure director is one that has been appointed to the company in the proper fashion, during the company formation process, or after the company has been formed.
This means:
- The correct documents have been completed and filed at Companies House (IN01 if appointed during formation, AP01 if after)
- The necessary resolutions passed (post-formation only)
- Meeting minutes have been taken and filed
Because of this, the director is on record at Companies House (and so can be found using the Companies House ‘Search the register’ tool) and has a fully established list of roles and responsibilities within the company.
It is also possible to have a corporate body as a de jure director, provided that the necessary steps have been followed (the AP02 form would need to be completed, instead of the AP01) and at least one actual person is also appointed as a de jure director.
To put it in simple terms, a de jure director is one that has been appointed to a limited company in the correct way.
Non-executive directors (NEDs) are considered de jure
A non-executive director (NED) is a director who has been appointed to a company to assist with a specific area or challenge within the business. They do not oversee or assist with the general day-to-day running of the company as a ‘normal’ company director would.
Non-executive directors, from the perspective of Companies House, are the same as normal directors and must be appointed formally via the director appointment forms (plus resolutions and minutes). Because of this, they are considered de jure.
Alternate directors are considered de jure
An alternate director is an individual who steps in to substitute for a director if the original director is going to be incapacitated for a period of time (for example, they will be in hospital for a while).
Alternate directors must still be appointed to the company through the necessary forms (plus resolutions and minutes). Because of this, they are considered de jure.
What type of director is not considered de jure?
You would be forgiven for thinking that it’s not possible to have a director who has not been officially appointed to the director role. However, there are two types of directors who are not de jure:
1. De facto directors
A de facto director is a person who carries out the tasks and duties generally associated with a director, but has not gone through the process of being formally appointed as one.
For example, if a person within a company makes key decisions, signs important documents, and is involved in third-party negotiations – they could be considered a de facto director.
De facto directors are defined in the Companies Act 2006 as:
“a person who has assumed the status and functions of a company director even though he has not been properly appointed.”
2. Shadow directors
A shadow director is a person who gives de jure directors instructions related to the company on which they then act, even though the shadow director has not been formally appointed to an officer role within the company.
For example, this could be an individual who has been disqualified from being a company director, but still operates a limited company from the background (or indeed, the shadows), through the demands they place on the board of directors.
Shadow directors are defined in the Companies Act 2006 as:
“a person in accordance with whose directions or instructions the directors of the company are accustomed to act.”
De jure, de facto, and shadow: Why does it matter?
It all comes down to accountability.
If the company is involved in any wrongdoing and the board of (de jure) directors is found to have breached their duties, they would be held responsible and made personally liable.
However, if a Court decides that de facto or shadow directors were in place – they would be made liable for any misconduct that has taken place.
By recognising the existence of de facto and shadow directors, Courts can decide who is ultimately culpable and should shoulder any blame.
So there you have it
What is a de jure company director? A de jure director is one that has been appointed to a company in the correct, legal way.
Did you know that we can take care of all the necessary steps for appointing a company director?
With our Director Appointment & Resignation Service (available for only £29.99), we will prepare the appointment letter and the board resolution, and submit the necessary appointment documents to Companies House – ensuring your director appointment is de jure.
Thanks for reading this post. If you still have any questions, please don’t hesitate to comment and we’ll get back to you as soon as possible.
