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ARTICLE · 14 APRIL 2015

Shadow director caught under insolvent trading provisions

Corrs Chambers Westgarth
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The judge found that the plaintiff was a shadow / de facto director when the debts were incurred, so ordered him to pay.

AustraliaInsolvency/Bankruptcy/Re-Structuring
David Abernethy
David Abernethy
Jason Salman
Jason Salman
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BACKGROUND

Mr Featherstone was recorded as director of Ashala Pty Ltd (Ashala) from 10 March 2004 to 7 October 2005 and from 28 November 2005 to 12 December 2005. Ashala occupied premises which Mr Featherstone owned as trustee for his family trust.

On 7 October 2005, Mr Featherstone agreed to transfer his shares in Ashala and two other related companies to Ms Kristy Marks and for Ms Marks to become the sole director of the three companies. This agreement was recorded in an "agreement letter" and ASIC was notified accordingly.

Around 20 months later, Mr Featherstone was "employed" by Ashala as training and events coordinator. The "employment letter" stated that Mr Featherstone had "no responsibility or rights or powers as a director...", and "[he would not] be involved in any decisions that substantially affect the operation of Ashala." The letter did, however, acknowledge that Ms Marks might at times seek Mr Featherstone's advice.

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