Are administrators liable as shadow directors? by Marc Ryckmans

The law surrounding shadow directorship and the operation of the professional adviser exemption remains in a state of flux. In the recent case of Hill v David Hill Electrical Discounts Pty Ltd (2001) 37 ACSR 617, the Supreme Court, Equity Division, speculated that an administrator of a deed of company arrangement might be a shadow director.

Section 9 of the Corporations Act specifically provides that the term ‘director’ includes not only a person who is properly appointed to the position of director but also a ‘defacto’ or ‘shadow’ director. A ‘shadow’ director means a person in accordance with whose instructions or wishes the directors of a company are accustomed to act.

The law imposes onerous duties on company directors and there are significant penalties for directors who fail to properly discharge their duties and obligation. In particular, directors can be held liable for insolvent trading. In the context of an administration, the risk is greatly increased…

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