Shadow Directors of a Company

Meaning of Shadow Directors:

‘Shadow Director’ is not actually a person who is appointed/designated as Director of a Company. But this is a Person (mostly an employee of manager cadre), in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act.

A Person, only because of the reason that he advices the Board in his Professional Capacity, should not be considered as a Shadow Director.

This Shadow Director may be construed as the Real Decision maker of the Company.

Liability of Shadow Directors:

These Shadow Directors are considered as 'Officer-in-Default' of a Company as per Section 5 of the Companies Act, 1956 and they shall be liable be to any punishment or penalty, whether by way of imprisonment, fine or otherwise as may be prescribed under the Companies Act, 1956 for any acts of such Officer-in-Default liable for penal action.