Did you know that you don’t necessarily need to be a registered director of a company to be considered one? In some cases, your actions within a company may deem you to be what is known as a shadow director. If this is the case, you too have legal obligations that you must comply with just as a registered director does. If you fail to do so, you could be held personally liable for decisions made by the company, resulting in substantial (and likely unexpected) personal exposure.

How do I Know if I am a Shadow Director?

The Corporations Act (Act) is the legislative instrument governing business entities in Australia. The Act defines a director to include a person who acts in the role of a company director despite not formally appointed as such (or listed on ASIC records) or whose instructions a company’s directors act on or for. A shadow director is also often referred to a de-facto director.

Not every person whose advice the company’s board follows is necessarily considered a shadow director. For example, you are not automatically considered a shadow director if you advise the company’s directors in your professional capacity or your role as a business advisor to the company, You must have the potential to control the board’s decisions and must exercise this power. However, this does not mean that the directors must follow your advice each and every time. In fact, even if they occasionally disregard your advice, you may still be considered a shadow director.

If I am Deemed a Shadow Director, What are my Duties?

Under the Act, a director has many duties and obligations. A shadow director owes the company the same duties as a formally appointed director. This includes:

  • Exercising powers and discharging duties in the company’s best interest and for a proper purpose;
  • Exercising powers and discharging duties with the care and diligence that a reasonable person would exercise if they were a director, occupied the office and/or had the same responsibilities within the company as the director. This includes ensuring you are accurately informed about the company’s financial position, and the company doesn’t trade insolvent; and
  • Not improperly using information or the position as a director to gain an advantage for personal interests or to cause detriment to the company. 

If you believe you may be acting in the capacity of a shadow director, it’s critical that you comply with the duties and obligations of a director as required by law.

What is Assessed in Determining if I am a Shadow Director?

In determining whether a person is a shadow director, the following factors will be considered:

  • Your conduct with respect to the business’ operations;
  • Determining whether you are performing the functions which the director is expected to perform;
  • Determining whether the person has sufficient influence to control the acts of the other directors of the company.


If you believe that you may be a shadow director of a company, and are unsure of your legal obligations – ask. When speaking with a corporate lawyer, tell them about your involvement in the day-to-day operation of the company, whether you are an employee of the company, whether you attend board meetings and your involvement in the company’s decision-making process. If you have any questions, let us know on 1300 544 755.

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at info@legalvision.com.au

View Privacy Policy