Shadow director

Please note: This section applies to charitable companies only.

A shadow director in a charitable company is someone who is not formally elected or appointed as a trustee but someone who ‘in accordance with whose directions or instructions the directors [trustees] of the (charitable) company are accustomed to act’.

A shadow director could, for example, be the paid chief executive, if it can be shown that the chief executive is effectively in control of the board. 

It is a serious matter if an individual is found to be a shadow director. They take on the legal duties and liabilities of a director and could be held personally liable for their actions: for example, if the organisation is found to be wrongfully trading.

A shadow trustee who is also employed in a charity may not have the necessary authority to take on both roles, because of the restrictions governing payments to trustees. In this case, the shadow director could potentially be held liable for breach of trust as a result of the unauthorised payment of their salary and could be required to return the payment.  

How can trustees avoid this situation?

• Trustees must maintain the freedom to make judgements free of any third parties’ control
• All trustees and chief executives should be clear about their distinctive roles
• The trustee board should, whenever possible, maintain a good working relationship with the chief executive and be fully engaged in holding the chief executive to account for their day to day running of the charity
• The board should have procedures in place for the appointment, supervision and appraisal of the chief executive
• More generally, all trustees should understand that the board takes overall responsibility for the organisation’s work. They should be fully engaged in ensuring the organisation furthers its charitable purposes, is solvent and well-run.