ExpertMedium2 marksMultiple Choice
Management, administration and the regulation of companiesSection ASyllabus FCorporate and Business Law
ACCA · Question 17 · Management, administration and the regulation of companies
In a family-owned brewery, the retired founder, Arthur, is not officially on the board of directors. However, the officially appointed directors refuse to make any major decisions without Arthur's approval, and they consistently follow his instructions.
In company law, how would Arthur be classified?
In a family-owned brewery, the retired founder, Arthur, is not officially on the board of directors. However, the officially appointed directors refuse to make any major decisions without Arthur's approval, and they consistently follow his instructions.
In company law, how would Arthur be classified?
Answer options:
A.
A de jure director.
B.
A de facto director.
C.
A shadow director.
D.
An alternate director.
How to approach this question
Match the scenario (instructing the board from behind the scenes without acting as a director publicly) to the statutory definition in s.251 CA 2006.
Full Answer
C.A shadow director.✓ Correct
Under s.251 of the Companies Act 2006, a shadow director is defined as 'a person in accordance with whose directions or instructions the directors of the company are accustomed to act'. Because the official board consistently follows Arthur's instructions, he is a shadow director and is subject to many of the same legal duties as official directors.
Common mistakes
Confusing shadow directors with de facto directors. A de facto director openly acts as a director (e.g., signing documents as 'Director'), whereas a shadow director controls the board from behind the scenes.
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