26 September 2008
In american contest not indian contest
THE PROFESSIONAL ADVISOR AS A DEEMED DIRECTOR Introduction The American cynic Ambrose Bierce defined a corporation as “An ingenious device for obtaining individual profit without individual responsibility.”1 Although written almost a century ago the definition reflects a current perception that the privilege of limited liability provided by a corporate vehicle is often abused. The Corporations Act 2001 does impose, as does other legislation, individual responsibility on directors of companies in some circumstances. This paper analyses the extent to which persons who are deemed to be directors, even though not formally appointed, can be at personal risk. The emphasis will be on professional advisers, although the position of some others will also be examined. The specific risks will be reviewed and precautions will be suggested to minimise those risks. The question is when do professional advisers cease to be advisers and become exposed to personal liability as deemed directors ? Put another way, when can a professional adviser “be said to have traversed that nebulous line into the treacherous realm of shadow directorship…” ? 2
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