Secretary of State for Trade and Industry v Deverill and another: CA 20 Jan 2000

When considering what constituted a shadow director, courts should be reluctant to move away from the words of the Act. The words should be construed carefully because the term was used in several pieces of legislation, including those with penal provisions. A shadow director is one who has real influence on a company. He does not have to affect all the company’s affairs, but to affect those concerned particularly with corporate governance and financial matters. Professional advisers, advising on matters within their usual professional practice, would not normally be considered as such.
Morritt LJ: ‘i) The definition of a shadow director is to be construed in the normal way to give effect to the parliamentary intention ascertainable from the mischief to be dealt with and the words used. In particular, as the purpose of the Act is the protection of the public and as the definition is used in other legislative contexts, it should not be strictly construed merely because it also has quasi-penal consequences in the context of the Company Directors Disqualification Act 1986.
ii) The purpose of the legislation is to identify those, other than professional advisers, with real influence in the corporate affairs of the company. But it is not necessary that such influence should be exercised over the whole field of its corporate activities.
iii) Whether any particular communication from the alleged shadow director, whether by words or conduct, is to be classified as a direction or instruction must be objectively ascertained by the court in the light of all the evidence. In that connection it is not necessary to prove the understanding or expectation of either giver or receiver. In many, if not most, cases it will suffice to prove the communication and its consequence. Evidence of such understanding or expectation may be relevant but it cannot be conclusive. Certainly the label attached by either or both parties then or thereafter cannot be more than a factor in considering whether the communication came within the statutory description of direction or instruction.
iv) Non-professional advice may come within that statutory description. The proviso excepting advice given in a professional capacity appears to assume that advice generally is or may be included. Moreover the concepts of ‘direction’ and ‘instruction’ do not exclude the concept of ‘advice’ for all three share the common feature of ‘guidance’.
v) It will, no doubt, be sufficient to show that in the face of ‘directions or instructions’ from the alleged shadow director the properly appointed directors or some of them cast themselves in a subservient role or surrendered their respective discretions. But it is not necessary to do so in all cases. Such a requirement would be to put a gloss on the statutory requirement that the board are ‘accustomed to act’ ‘in accordance with’ such directions or instructions. ‘
and ‘i) If the directors usually took the advice of the putative shadow director, it is irrelevant that on the occasions when he did not give advice the board did exercise its own discretion; and ii) If the board were accustomed to act on the directions or instructions of the putative shadow director it is not necessary to demonstrate that their action was mechanical rather than considered.’


Morritt LJ


Times 21-Jan-2000, Gazette 20-Jan-2000, [2001] Ch 340


Company Directors Disqualification Act 1986 22(5)


England and Wales

Cited by:

CitedUltraframe (UK) Ltd v Fielding and others ChD 27-Jul-2005
The parties had engaged in a bitter 95 day trial in which allegations of forgery, theft, false accounting, blackmail and arson. A company owning patents and other rights had become insolvent, and the real concern was the destination and ownership of . .
Lists of cited by and citing cases may be incomplete.


Updated: 11 May 2022; Ref: scu.89133