Dictionary

  • De facto director

    A de facto director is a person who acts in the capacity of a director, but has not been officially appointed to that role. This is in contrast to a de jure director who is specifically appointed as per company policy

    De facto directors may play a significant role in top-level management, act with full discretion ‘as the company’, have the authority to approve or reject strategy and financial decisions, have control over company assets, be reasonably perceived by people both internal and external to the company as its director, or guide the day to day operations of the company.

    To be classed as a de facto director, one must have more involvement than that of a consultant or administrative manager.

    To determine whether someone is a de facto director, the court will look at the decisions and actions of the person in question, and assess whether they are executive in nature.

    De facto directors are subject to the same rules and regulations as normal directors, and as such, they carry a large amount of personal liability. Where directorial duties are breached, knowingly or unknowingly, both civil and criminal penalties may apply. Directorial duties that carry penalties if breached include preventing the company from trading while insolvent, avoiding conflicts of interest, exercising good faith, and reporting to liquidators where applicable.

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