Directors: Who are they?

?? ?à???? By Loo Choon Chiaw??The recent formation of the Singapore Institute of Directors underlined the im-portant roles played by company di-rectors. It has further brought into focus the topic of Corporate Governance in general . The writer proposes to examine the legal issues of directors in a series of articles in this column commencing from this article. Unless otherwise specified, all references to statutory provisions are references to the Companies Act (Cap. 50) (hereafter referred to as ''the Act'').??The readers may be surprised to note that despite its importance, the term ''di-rector'' is not statutorily defined. Section 4 of the Act (hereafter referred to as ''Section 4'') merely states that a ''director'' includes any person occupying the position of director of a company by whatever name called (hereafter referred to as ''de factodirector'') and includes a person (other than a professionaladviser) in accordance with whose directions or instructionsthe directors of a company are accustomed to act (hereafter referred to as ''shadow director'') and an alternate or substitute director. Thus, pursuant to Section 4 and in thecase of a de facto director and a shadow director res-pectively, a person may be a director though not designated as such. In con-trast, persons may be described as directors, for instance, Finance Director, Marketing Director or Human Resource Director, without their occupyingthe po-sition of directors within the meaning of Section 4.??The terms ''de facto director'' and ''shadow director'' are not statutory terms. The extension of the term ''director'' to cover both a ''de facto director'' and a ''shadow director'' aims to prevent those controlling the company from evading their statutory liabilities and obligations as directors by simply not accepting appointmentas directors. In practice, it is not always easy to establish a person as a shadow director of a company, which involves the proof that the relevant board of directors has been failing to exercise any discretion or judgment, contending instead to act upon the directions and instructions of the alleged shadow di-rector as a matter of practice over a period of time.??In the present context, whilst both ''de facto directors''and ''shadow directors'' are persons who have not been formally appointed to the relevant board of di-rectors, theyare conceptually different and distinct. A de facto director is a per-son who assumes the functions of a di-rector. He is held out by the relevant company as its director, and personally claims and purports to act as such,although never formally appointed. In contrast, a shadow director does not claim or purport to act as a director. Indeed, he claims not to be a director. To borrow the language used in an Eng