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 other directors if they do not follow their instructions. In the 1990′s bank employees often gave advice and loans conditional on advice being taken; this practice led to some of the banks being deemed to be shadow directors and, as a result, liable for the inappropriate actions of the company.
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