What amount of paperwork am I obliged to produce to a shadow director?

I set up a small Ltd company in July of this year.

There are two directors; myself and my partners brother. I am the main shareholder, whilst the BIL is none shareholder (shadow director).

BIL is in financial difficulty and is currently co-operating with his bank to restructure loans.

The bank are looking to know the full ins and outs of his financial position. He makes no input within the company nor does he draw a salary from it.

BIL phoned me to say the bank were looking for full disclosure of the company's accounts etc, a letter of verification of what percentage of shares he holds within the company, plus a mammoth amount of other paperwork.

Keeping in mind BIL's percentage holding in the company - what amount of paperwork am I obliged to produce?

BIL is a bona fide director as you appointed him, assuming that info is with the CRO, a shadow director is someone whose existence is hidden from officialdom. A director is someone appointed by shareholders to help run a company and it doesn't matter if a director owns any shares or not. BIL has told bank he is a director but as a non-shareholder his bank wouldn't have any interest in accounts as BIL doesn't own any of company or get remuneration.

Why have BIL as a director anyway? He doesn't contribute in any way to the company, just axe him, one less headache for you.

STEINER said:

......Why have BIL as a director anyway? He doesn't contribute in any way to the company, just axe him, one less headache for you.

Click to expand...

Company law requires 2 directors

He says he never mentioned to the bank he was a director, but he did mention that they did a search on him and found out he was a named director.

He handed me a list of paperwork a mile long that his bank are now requesting.

I gave him a letter which was verified by the company accountant stating that he is a shadow director and no more.

The bank got back to him still insisting he hand them a copy of the company accounts, stating that even as a shadow director he would be intitled to same.

I am not estatic by this and unsure were to draw the line.

Kerrigan, do you understand what a shadow director is?

any person, other than a professional adviser, with whose instructions the directors of the company normally comply is a shadow director. In other words, where a person who is not a director exerts such an influence over the company's directors that those directors are accustomed to acting in accordance with that person's instructions, that person is a shadow director. The significance of being a shadow director is that a shadow director has many of the legal responsibilities of a director.

Click to expand...

If the company has appointed your BIL as a director, ie; forms lodged showing his appointment with the CRO, then he is a full director under the eyes of the law and you must comply with all requests.

Hi RonanC, are whatever funds I have in the business bank account safe from BIL creditors?

Kerrigan said:

Hi RonanC, are whatever funds I have in the business bank account safe from BIL creditors?

Click to expand...

It looks like you've actually inverted where the risks lie in arrangements like yours...!

Does he own any shares in the company?

If not, then neither he nor his creditors have any claim to anything... (as has already been explained

In fact, if anything, the person at risk is your BIL - if you were found to have traded fraudulently or recklessly through the company, then he, as a director, could be found guilty of an offence, and held personally liable for the debts of the company.