Shadow director
What is a shadow director, and how can a lender become one?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A shadow director is a person who has not been appointed a director but on whose instructions a company's directors are accustomed to act, and who can carry some of a director's duties and liabilities as a result; company law in the UK, Australia and New Zealand all reach such a person. A lender that tells a struggling borrower which suppliers to pay, whom to hire or what to sell risks that position. Setting conditions, asking for information and declining to lend are a lender's part; running the company is not.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
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- Standstill agreement
- Expected loss
- Watch list
- Loan loss provision
- Receivership
- Forbearance
- Evergreening
- Non-performing loan (NPL)
- Probability of default (PD)
- Loss given default (LGD)
- Exposure at default (EAD)
- Significant increase in credit risk (stage 2)
- Write-off
- Workout
- 13-week cash flow forecast
- Voidable preference
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