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If we consider for a stranger to be a director of our company, what may be the potential risks?

Updated: Mar 12, 2019

... and how to make such an arrangement?

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Both the Company and the (stranger) director are to, most times, jointly responsible and liable for most legal violations

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So, here is our answer


Regardless of the arrangement in appointing a stranger as a director; aka with or without involving a law firm or directly approaching the stranger, potential risks are upon the both parties – the Company and the stranger. If someone in the company did something against the law without this stranger director involved, him or her could get dragged in to be liable for it. Vice-a-versa, if this stranger director did something illegal, he or she could take the company in on being liable for that misconduct as well.If the director’s appointment was done under a contractual agreement drafted by a law firm, some risks may be reduced by stating clearly and concisely in the contractual agreement that: The stranger director is to not make use of the knowledge on the Company’s trade secret for personal gains in any way, shape or form. In case of the law violation, the at fault party; either the stranger director or the Company, is to indemnify or compensate the other who is dragged into the fault which the innocent did not take part in.The stranger director is a co-signing authority who his/her signature alone is not complete without another signature of a director or shareholder of the Company. Signing authority allowing a single signing authority or co-signing authority is to be specified in the company incorporation application.

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