Directors Liabilities

Directors Liabilities – Can a director remain liable for company debts in liquidation?

Potential Directors Liabilities during liquidation remain essential for the previous directors and moving forward.

A director not to have acted responsibly opens the director up to accusations of potential wrongful or unlawful trading. Directors become exposed to penalties, disqualification or personal liability.

When a company is insolvent, directors’ responsibility is transferred from shareholders’ interests to creditors.

Legal claims against the limited company, such as county court judgements CCJS, remain the responsibility of the company, not the officers of the company.

Please view what happens to a director of an insolvent company?

The company must stop trading and ensure that all assets of the company remain protected and insured.

Directors should work with the liquidator with honesty to conclude the liquidation for the best results of creditors, while receiving full cooperation from the director. Therefore, this helps the director avoid criticism of their conduct.

What does limited liability mean?

Directors Liabilities & Personal Liability?

A director may be held personally liable:-

• To a fine when the company fails to comply with The Companies Regulations 2008;
• Contracts signed on behalf of the company before its incorporation;
• Failure to make disclosures required;
• Acting in any form of management for a limited company while disqualified, or taking instructions knowingly from a person disqualified;
• If the Pensions Regulator served a contribution notice to the director under section 75 of the Pensions Act 1995;
• Party to intentionally carry on the business to defraud creditors or persons;
• For damages, when a director fraudulently or negligently misrepresents when negotiating a contract with a third party;
• A director of a failed liquidated company and set a new company operating with the same or similar name within 12 months after liquidation;
• Making a false statement about the affairs of the company, deceiving shareholders or the company creditors;
• Failing to make clear they contract not personally, but as an agent of the company;
• Or acting as a director while trading wrongfully or fraudulently under the Insolvency Act, 1986.

Are Shareholders Liable for Company debts?

The stakeholders of a ‘limited’ company remain not personally liable (as shareholders) for the company’s liabilities. As shareholders, their only obligation is to pay the company any unpaid money on its shares if asked. However, members holding office may be personally liable as directors, not as shareholders, under the circumstances described above.

Can HMRC hold directors liable for outstanding tax?

Disqualification and Directors Liabilities 

A disqualification order may therefore expose you to director’s liabilities, as it will then ban an individual from acting as a director of a company for a maximum period of 15 years. So if you breach the ban, you have committed there for a criminal offence. As a result, you might be exposed to a prison sentence and a fine. In addition, you may be held liable for any unpaid debts of the company.

The disqualification of a director follows an investigation of the company’s operation. You can therefore be accused of misconduct, inability, sharing in wrongful trading and other grounds.