Businessman Fends Off 'Shadow Director' Claim Following Immigration Raid

It is a simple matter to identify registered directors of any English company – the information is readily available from Companies House or online – but putting a name to de facto or shadow directors is more of a challenge. The High Court tackled that issue in seeking to identify the real boss of an Indian restaurant where staff were employed who had no right to work in the UK.

After immigration officers raided the restaurant, four migrants were arrested on the basis that they were working there illegally. The company that ran the restaurant later received a £45,000 civil penalty, which had not been paid. The company had only one director, who also owned all of its shares and the restaurant's premises.

The Department for Business, Energy and Industrial Strategy argued, however, that the restaurant's real boss was a businessman who was its de facto director. It sought an order against him under Section 8 of the Company Directors Disqualification Act 1986 which would have the effect of banning him from acting as a company director for up to 15 years. It did so on the basis that he was unfit to be involved in the management of any company.

Rejecting the Department's case, however, the Court noted that only one of the four arrested workers identified someone with the same surname as the businessman as a boss of the restaurant. It was a common surname and the worker's statement was an extraordinarily slim basis on which to argue that the businessman had assumed the responsibility of a director of the company. Evidence concerning his involvement in advertising the restaurant online was, if anything, even weaker.

The businessman had personally applied for an alcohol licence for the restaurant and was nominated as designated premises supervisor. However, the Court found that he had taken on those roles as a favour to the sole director. There was no evidence that he ever supervised the sale of alcohol on the premises and his application was a straightforward pretence to the licensing authority. That was a wrong thing to do, but it did not indicate that he had a shadow interest in the restaurant or played any part in its management.

The Department's superficial investigation had turned up no evidence that he did anything at the restaurant or that he had even been seen there in the six months prior to the raid. None of the other arrested workers had mentioned his name and there was no evidence that he received a share of the company's profits or that he had access to management information concerning its affairs.

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