UK Small Business Enterprise and Employment Act 2015 (Act)

Section 89 of the Act amends section 170(5) of the Companies Act 2006 (CA 2006) to provide that the general duties of directors (as set out in sections 170 to 177 of the CA 2006) apply to shadow directors where and to the extent they are capable of applying. Sections 170 to 177 of the CA 2006 set out the general duties of directors and include:

1. Duty to act within powers;
2. Duty to promote the success of the company;
3. Duty to exercise independent judgment;
4. Duty to exercise reasonable care, skill and diligence;
5. Duty to avoid conflicts of interest;
6. Duty not to accept benefits from third parties;
7. Duty to declare interest in proposed transaction or arrangement.

Your corporate solicitors can provide further guidance on these duties.

Section 90 of the Act also amends the definition of shadow director in section 251 of the CA 2006. Section 251(2) currently provides that a person is not to be regarded as a shadow director by reason only that the directors act on advice given by him in a professional capacity. Section 90 provides that the words “on advice given by him in a professional capacity” will be substituted by:

(a) on advice given by that person in a professional capacity;

(b) in accordance with instructions, a direction, guidance or advice given by that person in the exercise of a function conferred by or under an enactment of law;

(c) in accordance with guidance or advice given by that person in that person’s capacity as a Minister of the Crown.

Your corporate solicitors can provide detailed advice on the interpretation of section 90.

Sections 89 and 90 came into force on 26 May 2015.