Is your "Sales Director" really a director? Job titles, de facto directors and shadow directors

By · Solicitor, qualified 2003 · Founder, Bonsai Law

Published

Plenty of businesses give senior staff a title with "director" in it: Sales Director, Director of Operations, Creative Director. Most of them have never been appointed to the board, and Companies House has never heard of them.

Does that matter? Usually not, but it can. The title on its own does not make someone a director in law. But if that person starts acting like one, or the company presents them to the outside world as one, the law can treat them as a director, and the consequences fall on both the company and the individual.

This guide covers companies registered in England and Wales. The law is stated as at 24 October 2026.

Who counts as a director in law?

The Companies Act 2006 does not limit "director" to people who are formally appointed. Section 250 says that "director" includes "any person occupying the position of director, by whatever name called" (Companies Act 2006, s.250).

That gives three kinds of director:

  • A validly appointed (de jure) director. Appointed under the company's articles. The company must notify Companies House within 14 days, and since 18 November 2025 the notice must confirm that the director's identity has been verified (Companies Act 2006, s.167G).
  • A de facto director. Someone who has not been validly appointed but acts as a director.
  • A shadow director. Someone who is not on the board, but whose directions or instructions the directors are accustomed to follow (Companies Act 2006, s.251).

The words "by whatever name called" cut both ways. A title is not what makes someone a director, and the absence of the title does not stop them being one.

Does calling a manager "Director of Sales" make them a director?

Not by itself. A Sales Director who runs a sales team, reports to the board and has no say in how the company as a whole is run is an employee with a grand title.

The question is what they actually do. The Supreme Court has said there is no single decisive test. In a claim for breach of a director's duties, the key questions are whether the person was part of the company's "corporate governing structure" and whether they assumed the duties of a director ([Holland v Revenue and Customs Commissioners [2010] UKSC 51](https://caselaw.nationalarchives.gov.uk/uksc/2010/51) at [39] and [93] to [94]).

In [Smithton Ltd v Naggar [2014] EWCA Civ 939](https://caselaw.nationalarchives.gov.uk/ewca/civ/2014/939), the Court of Appeal confirmed there is no single test. The court looks at what the person actually did, "not any job title actually given to him", and considers everything in the round. Whether the company held the person out as a director, and whether outsiders thought they were one, are relevant factors (at [33], [38], [40] and [42]).

So the title is evidence. It is not decisive, but if it comes with board-level decisions, it starts to matter.

What makes someone a de facto director?

Signs a court may look at include:

  • attending board meetings and taking part in decisions about the company as a whole;
  • signing contracts, cheques or documents that only a director would normally sign;
  • negotiating with the bank, investors or major customers on the company's behalf;
  • being described as a director to outsiders, on the website, letterhead, email signature or LinkedIn, with the company's knowledge;
  • having the final say on strategy, finance or hiring at a senior level.

No single factor settles it. Each case turns on its facts.

What is a shadow director?

A shadow director is someone in accordance with whose directions or instructions the directors are accustomed to act (Companies Act 2006, s.251(1)). They do not sit on the board, and often do not want to be seen, but the board does what they say.

Typical examples are a founder who has resigned as a director but still runs things, a major investor who tells the board what to do, or a family member who controls the business from behind the scenes.

Someone is not a shadow director just because the directors act on their professional advice (s.251(2)). An accountant or solicitor advising the board is not a shadow director simply because the board takes the advice.

Why does it matter to the company?

The company may be bound by what they sign. If the people who run the company (for example, the board) represent, by words or conduct, that someone has authority to make contracts of a particular kind on its behalf, for example by giving them a "director" title and letting them negotiate and sign deals, a third party who relies on that can enforce the contract even if the person had no actual authority (Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480). The representation must come from the company, not just from the person themselves, and it does not help a third party who knew, or should have realised, that the person lacked authority. A "Sales Director" who signs a long supplier contract may commit the company to it.

Your public information may be wrong, and someone may be committing an offence. If someone is acting as a director, the Companies House record of your directors is incomplete, and since 18 November 2025 that record is the only register of directors: companies no longer keep their own (Companies Act 2006, s.162, now omitted). An individual must not act as a director unless their identity has been verified with Companies House. Breaching this is an offence by the individual, and failing to prevent it is an offence by the company and every officer in default (Companies Act 2006, s.167M). For directors who were already in post on 18 November 2025, there is a 12-month transition: each must verify by the date of their company's next confirmation statement, and the offence applies to them once that date has passed. Because "director" in the Act includes anyone acting as one, a person who is a director in all but name may be caught too. The offences are the only consequence: a contract signed by an unverified director is not void for that reason (s.167M(6)).

Insurance may not respond as you expect. Directors' and officers' insurance policies define who is covered. Check whether the wording covers de facto and shadow directors before you rely on it.

Why does it matter to the individual?

A de facto or shadow director can take on a director's legal exposure without the title, the board seat or the information that goes with it:

  • Directors' duties. The general duties in sections 171 to 177 of the Companies Act 2006 apply to de facto directors because they occupy the position of a director (s.250; [Instant Access Properties Ltd v Rosser [2018] EWHC 756 (Ch)](https://caselaw.nationalarchives.gov.uk/ewhc/ch/2018/756) at [214]), and to shadow directors where and to the extent that they are capable of applying (Companies Act 2006, s.170(5)).
  • Identity verification offences. A shadow director is treated as an officer of the company for the offence of letting an unverified person act as a director (s.167M(4)), so someone running the company from behind the scenes can be prosecuted too.
  • Insolvency claims. If the company goes into insolvent liquidation or administration, the liquidator or administrator can bring a wrongful trading claim against its directors, and that expressly includes shadow directors (Insolvency Act 1986, ss.214(7) and 246ZB(7)). The courts have also applied wrongful trading to de facto directors (Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180, as explained in Holland at [86]).
  • Disqualification. For disqualification purposes, "director" includes any person occupying the position of director, by whatever name called (Company Directors Disqualification Act 1986, s.22(4)). Shadow directors are defined in s.22(5), and the court can disqualify them for unfit conduct too (s.6(3C)).

Worked example: the Sales Director who signed the contract (illustrative)

Invented for illustration. Not a real case or client.

Jo is Head of Sales at a manufacturing company. To help win customers, the owners change Jo's title to "Sales Director", and it appears in Jo's email signature and on LinkedIn. Jo is not on the board and has never been notified to Companies House.

A customer asks for a three-year exclusive supply deal. Jo negotiates it and signs it as "Sales Director". The owners would never have agreed to exclusivity.

The company may struggle to argue that Jo had no authority. The owners let Jo use the title and negotiate deals with customers on the company's behalf, and the customer had no reason to think Jo needed board approval. Whether that is enough for a three-year exclusive deal depends on whether a contract of that kind is one a sales director would usually have authority to make. Whether Jo is also a de facto director depends on what else Jo does: running a sales team is not enough on its own, but sitting in on board meetings and making company-wide decisions would point the other way.

Worked example: the founder who stepped back (illustrative)

Invented for illustration. Not a real case or client.

Alex founded a company and resigned as a director two years ago to reduce personal risk, leaving two managers on the board. Alex still holds most of the shares, and the two directors do not make any significant decision without Alex's instruction.

Alex may be a shadow director. If the company later becomes insolvent and continued trading when it should have stopped, Alex could face a wrongful trading claim alongside the two registered directors. Resigning did not remove the risk, because Alex kept the control. If you are a majority shareholder, our shareholder control calculator shows what your shareholding lets you decide on your own.

What should a business do?

  • Choose titles deliberately. "Head of Sales" or "Sales Lead" carries less risk than "Sales Director" for someone who is not on the board.
  • If you do use "director" titles, say what they mean. State in the employment contract and job description that the role is not a board appointment, and set out what the person can and cannot sign.
  • Have a written authority policy. Say who can sign contracts, approve spending and commit the company, and up to what value.
  • Keep the board separate. Only appointed directors should attend board meetings as members, take part in board decisions and sign as directors.
  • Check what the outside world sees. Look at your website, letterheads, email signatures and LinkedIn titles.
  • If someone already acts as a director, decide. Either appoint them properly (their identity must be verified with Companies House first, and the appointment notified within 14 days), or change how they work.

If you are unsure whether someone in your business is acting as a director, or whether you are, Bonsai Law can review how decisions are actually made and what needs to change.

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Sources

1. Companies Act 2006, section 250 2. Companies Act 2006, section 251 3. Companies Act 2006, section 170 4. Companies Act 2006, sections 167G and 167M 5. Insolvency Act 1986, sections 214 and 246ZB 6. Company Directors Disqualification Act 1986, sections 6 and 22 7. Companies Act 2006, section 162 (register of directors, omitted from 18 November 2025) 8. [Instant Access Properties Ltd v Rosser [2018] EWHC 756 (Ch)](https://caselaw.nationalarchives.gov.uk/ewhc/ch/2018/756) 9. [Holland v Revenue and Customs Commissioners [2010] UKSC 51](https://caselaw.nationalarchives.gov.uk/uksc/2010/51) 10. [Smithton Ltd v Naggar [2014] EWCA Civ 939](https://caselaw.nationalarchives.gov.uk/ewca/civ/2014/939) 11. Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480