The sections, word for word
Every section on this subject, exactly as printed in the Official Gazette (Act No. 3 of 2020). The explanation follows beneath.
Section 269. Meaning of directors
(1) A Director of a company registered under this Act is a person duly appointed by the company to direct and manage the business of the company.
(2) There is a rebuttable presumption in favour of any person dealing with the company that all persons who are described by the company as directors, whether as executive or otherwise, is duly appointed.
(3) Where a person not duly appointed acts or holds himself out as a director, he commits an offence and is liable on conviction to imprisonment for a term of two years or a fine as the Court deems fit for each day he so acts or holds out himself as a director or both and shall be restrained by the company.
(4) If it is the company that holds him out as a director, it is liable to a fine in such amount as the Commission shall specify in its regulations for each day it holds him out, and he and the company may be restrained by any member from so acting until he is duly appointed.
Section 270. Shadow director
(1) Without prejudice to the provisions of sections 269 and 276 of this Act, and for the purposes of sections 279, 301 and 307 of this Act, “director” shall include any person on whose instructions and directions the Directors are accustomed to act.
(2) Subject to sections 301, 306 and 307 of this Act, nothing contained in section 276 of this Act is deemed to derogate from the duties or liabilities of the duly appointed directors.
(3) Where a person in his professional capacity gives advice and a director acts on it , that shall not be construed to make such a person under this Act a person in accordance with whose directions or instructions the director of a company is accustomed to act.
What this means
Short answer
A director is a person duly appointed by the company to direct and manage its business (section 269(1)). A shadow director is someone on whose instructions the directors are accustomed to act, and the Act treats that person as a director for several purposes (section 270).
What section 269 says
Section 269(1) defines a director of a company registered under the Act as a person duly appointed by the company to direct and manage its business. Section 269(2) adds a presumption that protects outsiders: anyone dealing with the company can assume that the people it describes as directors, whether executive or otherwise, were duly appointed. The company can rebut that presumption.
Acting as a director without being appointed
A person who is not duly appointed but acts, or holds himself out, as a director commits an offence. On conviction the penalty is imprisonment for up to two years or a fine the court considers fit for each day, or both (section 269(3)). If the company is the one holding the person out, it is liable to a fine set by the Commission for each day, and a member can restrain both the person and the company until a proper appointment is made (section 269(4)).
Section 276 deals with the effect on contracts. If someone not duly appointed acts as a director for the company, his act does not bind the company and he is personally liable for it. If the company itself holds him out as a director, however, the company is bound by his acts.
Shadow directors
Section 270(1) says that, for the purposes of sections 279, 301 and 307, the word director includes any person on whose instructions and directions the directors are accustomed to act. That is a shadow director. The same idea reaches further: a shadow director is treated as a director for property deals with directors (section 310(4)) and for long employment contracts (section 317(7)).
There is one carve-out. A professional who gives advice that a director acts on is not a shadow director because of that advice (section 270(3)).
Questions and answers
What is the difference between a director and a shadow director?
A director is duly appointed by the company to direct and manage its business. A shadow director is someone the directors are accustomed to act on the instructions of. The Act treats a shadow director as a director for certain purposes, including sections 279, 301, 307, 310 and 317.
Can someone act as a director without being appointed?
Not lawfully. Acting or holding yourself out as a director without due appointment is an offence under section 269(3), and under section 276 the person is personally liable for what he does.
Does professional advice make someone a shadow director?
No. Section 270(3) says an adviser whose advice a director acts on is not, for that reason alone, a person the directors are accustomed to act on the instructions of.
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