A dummy director (a.k.a. a straw director) is a person who is a member of the board of directors of a company, who acts and votes on behalf of a non-director – i.e. they act as a dummy or puppet for someone else who is not named as a director. Dummy directors are directors only on paper, and act as placeholders, exercising no personal decision making control over the company, or holding any financial interest in it.
A dummy director may be used in a situation where someone wishes to become a director of a company, to exert control over it and gain financial benefit from it, but has been excluded from being a director by ASIC due to past misconduct relating to the Corporations Act 2001 (Cth).
Dummy directors are often family members or friends of the person they act on behalf of, and agree to be a dummy director out of loyalty, and/or because they don’t have the business acumen to understand the significance or consequences of what they are doing.