Shadow director is a person who can manage a company and will not be the official person holding a managerial position. The shadow director's tasks include negotiating contracts on behalf of the company. Shadow directors have a huge power and influence of management the company. They can manage one or several segments of company or even all of them.
Requirements for shadow directors
- both actual and auxiliary directors must be identified,
- a particular individual must show directors how to act,
- directors are required to act in accordance with the instructions given,
- shadow directors must act as subordinates.
How to prevent suspicions of management Shadow Director
If the company wants to minimize the probability that one of the people in the company may be considered a Shadow Director, it is recommended to introduce some restrictions :
- Only advisory consultation should be given instead of management a hole company or a project.
- The counselor should strictly define the rules and limits of the proceedings and should not undertake other additional activities going beyond this scope.
- Detailed guidelines and clear rules and responsibilities should be specified according to the role of this person.
- This person should make sure that the board of directors has not waived the rules and meet regarding the advice on which the minutes of the meeting are drawn up.
Consequences of being shadow director
Shadow directorships can have personal consequences such as :
- in the event of insolvency, companies may be deprived of their right to hold office
- are criminally and personally liable for any breach of their duties in the post
- in the event of insolvency of the company are responsible for the assets contributed to the undertaking
Identification of shadow directors
Elements to help establish and identify the shadow directors have been established by the court of law :
- demonstrating that the person performing this function has a real influence on the decisions that are made in the company,
- individual councils or guidelines will be assessed by the following
- shadow directors advice may be tantamount to instructions
- Idensohn K., (2010), The Regulation of Shadow Directorspg.327
- Moore C. R.(2016), Obligations in the Shade pg. 5
- Atkin D., Cheilyk D., (2015), Jumping at shadows — shadow and de facto directors pg. 3
- Kolohoida O.V.(2016), The Concept of Shadow Directors’ Liability pg. 130
- Davies J. (2007),A guide to directors’ responsibilities, pg. 14
- Atkin D., Cheilyk D. (2015), Jumping at shadows — shadow and de facto directors, "Governance Directions", nr. 8
- Davies J. (2007),A guide to directors’ responsibilities
- Idensohn K. (2010), The Regulation of Shadow Directors, "SA Mercantile Law Journal" nr. 22
- Kolohoida O.V.(2016), The Concept of Shadow Directors’ Liability under the United Kingdom and Ukrainian Legislation"Recht der Osteuropäischen Staaten", 03/16
- Moore C. R.(2016), Obligations in the Shade: The Application of Fiduciary Directors’ Duties to Shadow Directors, "University of Kant"
Author: Julia Kręcioch