Legal Definitions - dummy

In legal contexts, the term dummy refers to a person or entity that appears to be genuinely involved in a transaction or holds a particular position, but in reality, has no true interest, control, or decision-making power. Instead, they act as a placeholder or a front for another party, often to achieve a specific legal or business objective, sometimes to obscure the true parties involved.

• Example 1: Placeholder Director

  Imagine a small startup company that needs to meet a legal requirement to have a minimum of three directors on its board. The two founders want to retain complete control and decision-making authority. They might ask a trusted friend to be the third "dummy" director. This friend's name would appear on all official company documents and filings, fulfilling the legal requirement. However, the friend would not attend board meetings, make any strategic decisions, or have any actual responsibilities within the company. Their role is purely titular, serving as a placeholder to satisfy a legal formality.

• Example 2: Anonymous Property Purchase

  Consider a situation where a prominent investor wants to acquire a specific piece of land for a future development project but wishes to keep their involvement confidential. This might be to prevent the seller from inflating the price or to avoid public scrutiny before their plans are finalized. The investor could arrange for a trusted associate to purchase the land in the associate's name. The associate would hold the legal title to the property, but the investor would provide all the funds, dictate all decisions regarding the land, and ultimately be the true beneficial owner. In this scenario, the associate acts as a "dummy" owner, masking the real party of interest.

• Example 3: Shell Company for Asset Holding

  A large multinational corporation might create a new, separate company with minimal capital, no employees, and no active business operations. This "dummy" company might be established solely to hold a specific intellectual property asset, such as a patent or a trademark, or to manage a particular investment. All strategic decisions regarding the asset or investment would be made by the parent corporation, and the "dummy" company would exist primarily on paper as a legal vessel. Its purpose is often for tax planning, regulatory compliance, or to segregate assets from the main business operations without creating a fully functional subsidiary.