Abstract

The term ‘director’ is commonly limited to de jure directors. The Companies Act applies to those individuals who fall within the definition of ‘director’. However, de jure directors are not the only type of director found in practical corporate settings. De facto directors are not appointed as directors but are held out by companies as directors. Shadow directors are persons who have not been validly appointed as directors and are not held out by a company as directors, but who exercise some measure of control over the affairs of a company. The existence of de facto and shadow directors is not peculiar to South Africa. New Zealand has seen it fit to regulate de facto and shadow directors and has done so for over 70 years. It is uncertain whether the wording of the definition of ‘director’ in the South African Companies Act, includes de facto and shadow directors. The practical effect of uncertainty is the absence of clear avenues of accountability to those who occupy a position of power within a company without being validly appointed. This article illustrates the far-reaching consequences of the non-regulation of de facto and shadow directors, and a possible solution is suggested.