A shadow director is a person who acts in the capacity of a board member without formal appointment to the board of directors.
Shadow directors are taken to be directors if they exercise influence and control in a company.
However not everyone who advises a company or its directors will be regarded as a shadow director e.g. accountants who provide professional advice.
Shadow directors can still be professional advisors or members of advisory boards if they can influence decisions at board level. So care must be exercised.
A shadow director has the same legal responsibilities as other company directors so any disqualifications or restriction orders applicable to directors will also apply to shadow directors.
You may be considered a shadow director if you:
- Hire and fire staff
- Approve budgets and expenses
- Secure loans for the company
- Participate actively in board meetings
- Managing activities in the company
- Undertake negotiations for the company
Ignorance of the responsibilities of a director or a shadow director’s position will not be accepted as a legal defence.
Individuals should be careful if advising directors of an Irish company and understand their legal responsibilities and always act in the best interest of the company. Failure to do so may result in the imposition of personal liability for liabilities of the company as well as being prevented from acting as a director or company secretary.
The High Court in a recent case held that a shadow director bears personal liability for the loss caused to the plaintiff by the company and that the corporate veil be lifted.