Examining the concept of de facto director in corporate governance

Abstract

There are different categories of persons involved in the execution of the company’s affairs, but not all have the capacity to bind the company as the embodiment of the company itself. Those who exercise acts of management and control over the company’s business are usually referred to as the directors. Where persons who satisfy the statutorily prescribed qualification standard are duly appointed by the shareholders to exercise control and manage the affairs of the company function in that capacity, they are usually identified as de jure directors. But where there is no such appointment, or irregular appointment, the law demands, for the protection of those dealing with the company, that the role performed by the person be examined to ascertain whether such a person is a de facto director. The more difficult part lies in identifying a de facto director where the subject company has a corporate body as its director. The extant judicial authority suggests that the human person in the corporate director must be performing functions which are beyond the natural call of duty in relation to the corporate director to constitute a de facto director of the subject company. The paper argues that the standard is satisfied in any case where the human person is involved in the initiation and execution of the affairs of the subject company, and more so where the conducts of the subject company are patently unlawful.