shadow director

The Companies Act defines a shadow director as a person who instructs other directors what to do and those directors follow his instructions. Individuals who act in this way are deemed to have the same liabilities as properly appointed directors.

A shadow director can be any person, but are usually majority shareholders that threaten to replace them if they do not follow their instructions.

A properly appointed director's responsibility is to the company and not to the shareholders. Directors have an obligation to act in the company's best interests.

Usage: The majority shareholder's conduct give rise to the assertion that he was a shadow director of the company and liable for wrongful trading with the properly appointed directors.

Related Words: company; shareholders; shares.