|The provider of this information is MatthewsFolbigg|
DE FACTO DIRECTOR LIABILITY
Did you know de facto and shadow directors can be liable for breaches of the Corporations Act?
In light of the corporate failures of the past year, company directors are increasingly under pressure from regulators and governments as shareholders and the public demand greater accountability and transparency from them.
The law provides for company directors to be held personally liable - in some circumstances - for financial transactions made by the company. Corporate regulators are now cracking down on this law.
Companies and those controlling them need to be aware that the Corporations Act defines "director" to include de facto and shadow directors. Liability for contraventions of the Corporations Act, including the obligations and duties imposed on directors can extend to people who are involved in a company even if they are not officially appointed a director.
What is a de facto director?
- whether a person acts as a director
"will often be a question of degree, and requires a consideration of the duties performed by that person in the context of the operations and circumstances of the particular company concerned". Source: Madgwick J of Federal Court in DCT v Austin (1998).
What are the characteristics of a de facto director?
A necessary condition of acting as a director, whether properly appointed or not, is that they exercise 'top-level management functions'. For example, engaging in contractual negotiation on behalf of a company.
What is a shadow director?
What are the characteristics of a shadow director?
The law relating to de facto and shadow directors does not reverse the requirements under the Corporations Act.
For example, the requirement for a minimum number of directors only refers to validly appointed directors. In addition, shadow and de facto directors are specifically not included as directors under the Act for the purpose of:
This Information Outline is provided courtesy of Matthews Folbigg who are experienced in this area of law. They are located at Level 7 The Barrington, 10-14 Smith Street, Parramatta NSW 2124 or call them on (02) 9635-7966 if you would like more information on this legal topic, or you wish to obtain formal advice regarding your situation.
MatthewsFolbigg is a large commercial law firm based in Parramatta, New South Wales. The firm has Accredited Specialists in Business Law, Property, Immigration, Family Law and Personal Injury. MatthewsFolbigg has specialist groups advising clients in corporate structures, intellectual property, and information technology plus franchising, estate planning and insolvency work.
Select another subtopic of this information
Need further information? Visit our legal forum where you can ask questions and search for similar topics.