Is shadow director equally liable with the other directors for obligations of the firm?

CS Professional · Ethics, Governance and Sustainability · PYQS · December 2015
Is shadow director equally liable with the other directors for obligations of the firm?

Answer & Explanation:

Shadow Director is a person who is not formally appointed as a Director, but in accordance with whose directions or instructions the directors of a company are accustomed to act. However, a person is not a Shadow Director merely because the Directors act on advice given by him in a professional capacity. Shadow Director is a holder of controlling or majority share of a private firm who is not (technically) a director and does not openly participate in the firm's governance, but whose directions or instructions are routinely complied with by the employees or other Directors. In the eyes of law, he or she is a De-facto Director and is held equally liable for the obligations of the firm with the other De-facto and De-jure Directors.

Topics: Corporate Governance

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