Just in case anyone is interested, here's an extract from a book I wrote recently on company law, about shadow directors. Focussed is right - there would need to be some evidence of the 'directions or instructions'.
Section 251 Companies Act 2006 defines a shadow director as ‘a person in accordance with whose directions or instructions the directors of the company are accustomed to act.’ There may be political or other reasons why, for example, a major shareholder or lender does not want to be visibly on the board, but that person might still effectively control the company by virtue of the actual directors doing as they are instructed.
Decisions in court cases can often help to interpret statute. In Secretary of State for Trade and Industry v Deverell (2001) the Court of Appeal decided that the definition of ‘shadow director’ included anyone, other than professional advisers of the company, with real influence in the affairs of the company.
In Vivendi v Richards (2013) the High Court held that a shadow director will typically owe fiduciary duties in relation at least to the directions or instructions that he gives to the de jure directors. More particularly, the court held that a shadow director will normally owe a duty of good faith (or loyalty) when giving such directions or instructions.
Thus major shareholders or creditors who become closely involved in board decision-making run the risk of being deemed to be shadow directors.
This position is usually created by circumstance rather than by any specific appointment – indeed it is difficult to see why a shadow director would be deliberately appointed. In most cases, companies should try to avoid effective power moving from the directors to someone not on the board; it may happen, for example, as a result of an individual rescuing a company from financial problems by acquiring a controlling shareholding, or lending the company an amount in excess of its share capital.
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