It is often assumed that a shadow director owes the same fiduciary duties to the company as a formally appointed de jure director. However the decision in Ultraframe UK Ltd v Fielding (2005) said shadow directors were not liable where they did not directly deal with or claim the right to deal with the company’s assets.
This decision was recently considered in the case of Vivendi SA, Centenary Holdings III Ltd v Richards and others (2013). While not overturning that judgement, as both decisions were made in the High Court, the court in Vivendi stated that shadow directors do owe fiduciary duties to some degree. The court’s reasoning was based upon the following factors:
1. A shadow director by his very nature has assumed responsibility and directed how the de jure directors act.
2. The Companies Act, Insolvency Act and Directors Disqualification Act place specific duties upon shadow directors.
3. Promoters of a company owe fiduciary duties and are analogous with shadow directors.
4. A shadow director’s role in the company may be as important as a de jure director’s, who does owe fiduciary duties.
5. Shadow directors should owe fiduciary duties on public policy grounds.
Vivendi clearly states that Ultraframe understated the fiduciary duties owed by a shadow director to the company, as a bare minimum a shadow had duties in relation to the instructions he gives the de jure directors.
Vivendi cannot overrule Ultraframe, which creates confusion as to the true state of the law. However it seems clear that the reasoning in Vivendi is compelling and it is very difficult to justify the decision in Ultraframe.