Obligations in the Shade: The Application of Fiduciary Directors’ Duties to Shadow Directors

This paper argues that shadow directors, as defined in English law, ought to owe the full range of directors’ duties enacted in the Companies Act 2006 (CA 2006), ss 171-177, to the relevant company under their power and control. Following the enactment of CA 2006, s 170(5), such an argument is contingent upon the shadow director-company relationship being fiduciary in nature. It is argued here that such a relationship is fiduciary in nature, but the current approach of the English courts of applying Finn’s original formulated ‘undertaking’ test alone is inadequate. This argument is demonstrated via critical analysis of both the ‘undertaking test’ and the decisions of the English courts in Yukong Line v Rendsburg (1998), Ultraframe (UK) v Fielding (2005) and Vivendi v Richards (2013).

Given these inadequacies, it is proposed that the Canadian ‘power and discretion’ test be deployed alongside the ‘undertaking’ test, in order to provide a far more comprehensive justification for the application of fiduciary obligations to shadow directors. This position is supported by establishing a theoretical basis for the ‘power and discretion’ test, via Paul Miller’s ‘fiduciary powers theory’, as well as considering the application of such a test to shadow directors.