ExpertMedium2 marksMultiple Choice
ACCA · Question 17 · Management, administration and the regulation of companies
Section A
In a decentralized autonomous organization (DAO) structured legally as a private limited company, an external 'advisor' named Felix is not officially appointed to the board. However, the officially appointed directors are accustomed to acting in accordance with Felix's directions and instructions on all major financial decisions. What legal classification best describes Felix?
Section A
In a decentralized autonomous organization (DAO) structured legally as a private limited company, an external 'advisor' named Felix is not officially appointed to the board. However, the officially appointed directors are accustomed to acting in accordance with Felix's directions and instructions on all major financial decisions. What legal classification best describes Felix?
Answer options:
A.
A de facto director
B.
A shadow director
C.
An alternate director
D.
A non-executive director
How to approach this question
Distinguish between the different types of directors based on their behavior and formal appointment.
Full Answer
B.A shadow director✓ Correct
A shadow director is defined in s.251 of the Companies Act 2006 as 'a person in accordance with whose directions or instructions the directors of the company are accustomed to act'. Felix fits this perfectly as he is unappointed but controls the board's actions.
Common mistakes
Confusing shadow directors with de facto directors. De facto directors openly act as directors (e.g., signing documents as 'Director') despite lacking formal appointment. Shadow directors hide behind the appointed board.
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