For association bodies, the public register should match the true governance structure. If someone acts like a Director, a court may treat them as one. Where individuals acting as Directors are not properly recorded, the legal and insurance risks can be significant.

Why It Matters

Where governance arrangements are unclear, or where there is a disconnect between those formally recorded as Directors and the body which exercises actual control or influence, accountability becomes fragmented and legal risk increases. Where this occurs, the organisation may have “hidden Directors” — people exercising Director functions without being formally recorded.

Well-defined governance frameworks ensure that the governing body is properly constituted, decision-making authority is transparent, and any advisory or informal roles are clearly distinguished from those with formal fiduciary responsibilities. In doing so, organisations strengthen compliance, support better decision-making.

The Position at Law

Under the Companies Act 2006, a Director includes any person occupying the position of Director, whatever title they use. This means the court will look at substance over form.

In Smithton Ltd v Naggar [2014] EWCA Civ 939, the court confirmed that a person may be treated as a de facto Director where they assume the status and functions of a Director, become part of the corporate governance system, or exercise ultimate or shared control over management.

Importantly, job title was not decisive. Nor was it a defence that the individual believed they were not acting as a Director. The question is assessed objectively by reference to what they actually did.

For associations, this means someone described as an advisor, consultant or executive may still be treated as a Director if they are effectively governing the body (i.e., taking part in governance decisions).

Example in Case Law – Involvement in Management Matters

In Aston Risk Management Ltd v Jones & Others [2023] EWHC 603 (Ch), an individual became heavily involved in day-to-day operations, led negotiations, issued instructions and convened management meetings.

The Court found he was part of the governance structure, carried out functions only a Director would usually perform, and was the dominant personality behind decision-making. He was therefore treated as a de facto Director.

This is highly relevant to associations where ‘advisory bodies’ such as Councils become heavily involved in the operations and governance of an association.

Example in Case Law – Involvement in Governance Matters

In Isilay v AVP Capital A FCPI & Ors [2026] EWHC 1254 (Ch), the Court considered allegations that shareholder representatives and Board observers were participating in informal “Shadow Board Meetings” outside the company’s formal Board meetings. The allegations included that these meetings were being used to discuss, plan and make decisions on behalf of the company, including decisions concerning strategy and the company’s 2025 budget. The budget was alleged to have been approved in advance by shareholder representatives before being formally approved by the Board.

The Court held that the allegations were sufficiently arguable to proceed, including the allegation that the observers had acted as de facto Directors. Importantly, the Court considered that if persons who were not formally appointed as Directors were participating in informal meetings at which matters properly falling to the Board were being decided, this could amount to the exercise of directorial functions. The fact that a decision was subsequently formally approved by the Board would not necessarily resolve the issue if the substantive decision had already been made outside the formal Board process. While the allegations did not go to trial, the principles remain relevant.

This is relevant to associations where an advisory Council or Representative body is given responsibility not merely to advise the Board, but to determine the association's strategy, budget or other matters properly reserved to the Board. Such an arrangement may create a risk that the members of the advisory body are, in substance, exercising directorial functions notwithstanding their formal title or status.

Risk Management

Associations should also be alert to governance and regulatory risk. Based on the case law, a person acting as a Director may still owe legal duties and may face claims for breach of duty, conflicts of interest, misuse of funds or insolvency-related issues.

Governing documents - including Articles of Association, By-laws, Board Charters and delegation policies — should accurately reflect how the organisation is intended to be governed.

Where there is both a Board and a Council (or similar structure), it should be explicitly clear which body is the governing authority and which is advisory, so that responsibility, accountability and decision-making powers are not blurred. 

Likewise, any subsidiary committees should clearly understand that they are not autonomous decision-making bodies.

Further, many Directors’ & Officers’ (D&O) insurance policies are designed around properly appointed and disclosed officeholders. Failure to disclose Directors to Companies House or the Charity Commission may affect insurance coverage.

What Associations Should Do

Directors should be properly appointed and filed with Companies House or the Charity Commission.

Individuals who are not Directors should be described by their true role, such as Company Secretary, CEO, General Manager or adviser, with authority limits clearly documented in a delegations authority. Boards should also annually review the delegations authority to ensure accuracy.

Insurance disclosures should also be checked so governance structures and insured persons accurately reflect reality.

How Governology Can Help

Governology assists associations, charities and member bodies with governance reviews including board structures and practical risk management. If your governance structure in practice does not match your governing documents, now is the time to fix it.