In this article, I try to explain the principles applicable to a shadow director and the consequences that follow.

In law, the term de jure director means a ‘director as of right’ and is an individual who has been formally appointed as a director of a company. So, the individual’s office as a director is of public record.

However, there may be instances where an individual is not formally appointed as a director. But this individual is still able to wield influence over the company’s affairs. The law may find that the individual is a shadow director. This would mean this individual attracts all the duties and liabilities as a director of the company.

A director is therefore not necessarily defined by his designation alone but rather by the dominant or controlling role that the individual plays, often behind the scenes, in running the company.

Before delving into the legal principles, let us set out the brief facts of the hypothetical situation involving a company called 1ABC. We will then see how the legal principles apply to these facts. Continue reading →