Wednesday, 9 August 2017

Shadow Directors

A director of a company is the person responsible for managing the company’s affairs.

Although a person may not be formally appointed as a director or listed with ASIC as a director, for the purposes of the definition of “director” under section 9 of the Corporations Act 2001 (Cth), a person can (depending on the circumstances) still be subject to the same duties and liabilities as a director if they are deemed to be a shadow director.

Conduct that may indicate a person is a shadow director might include the extent to which:

  • they have performed top level management functions;
  • they “acted” as the company;
  • they have controlled decisions of the company;
  • they are perceived by others to be acting as a director;
  • other directors in the company are accustomed to acting in accordance with the person's instructions or wishes.

If a person were found to be a shadow director, they could be held personally liable for certain conduct in the same way as a formally appointed director. For example, insolvent trading.

High level company executives and advisers in positions of influence within a company also need to be mindful that they can be deemed shadow directors and exposed to personal liability in relation to the company's activities.

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The material provided in this document is for general information only and is not to be relied upon as advice. No responsibility is accepted for any loss, damage or injury, financial or otherwise, suffered by any person or organisation acting or relying on this information or anything omitted from it.

Copyright © Greyson Legal 2017, All rights reserved.

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