Shadow director

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ANJALI NEGI

ANJALI NEGI (Querist)
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27 November 2012 Hello Experts!!!

Can anyone tell me what all are the liabilities of Shadow Director of the co.

Hari Beldona

Hari Beldona (Expert)
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27 November 2012 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.
MEANING OF "OFFICER WHO IS IN DEFAULT
(e) any person in accordance with whose directions or instructions the Board of directors of the company is
accustomed to act ;

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Ajay Mishra

Ajay Mishra (Expert)
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27 November 2012 Explanation to section 303(1) says that any person in accordance with whose directions or instructions, the Board of directors of a company is accustomed to act shall be deemed to be a director of the company.

Same provisions of the Companies Act, 1956 also applies to a 'Shadow director' being person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act. However, if the Board of directors acts on advice given by a person in his professional capacity he will not be considered as a deemed or shadow director of the company.

Shadow director pre-supposes that there is a Board of directors who act in accordance with the instructions from some one else. [Lo line Electrics Motors Ltd. (1988) 2 (All) ER 692] The shadow director must be infact a puppet master controlling action of the Board. They must be people who act on the directions or instructions of the shadow director as a matter of regular practice. That must refer to acts not on one individual occasion but over a period of time and as a regular course of conduct. [Unisoft Group Ltd. No. 3 (1994) 1 BCCC 609]

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