Monday, 30 September 2013

Does Providing Professional Advice to a Limited Company put the Advisor at Risk?

The answer is generally no. Giving advice in a professional capacity to a limited company does not normally make someone a shadow director. However, you may be more at risk in certain situations - for example as an in-house lawyer or a financial adviser.

To minimise risk liability a person concerned should:

1. Ensure that all business decisions are properly taken by the board;
2. Ensure that any advice given does not take the form of a “dictat”;
3. Avoid taking control of the financial affairs of the company you are giving advice to;
4. Always make sure that minutes of board meetings reflect that decisions have been made by the board;
5. Always ensure the minutes reflect the capacity you are attending in (i.e. not as a director – for example as an advisor to the board).

There have been instances where management consultants have been disqualified and held to be de facto directors but the above should help avoid this situation arising.