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Directors Liabilities

Directors Liabilities. Written by John A Waller. Director. Revised October 22nd, 2022.

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

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

A company director who doesn’t act responsibly risks accusations of wrongful or unlawful trading. Directors become exposed to penalties, disqualification or personal liability.

With an insolvent company, directors’ responsibilitytransfers from shareholders to creditors.

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

Company directors should work with the liquidator honestly to therefore conclude the liquidation for the best results for 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 company 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 company 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 company 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 company director while however trading wrongfully or fraudulently under the Insolvency Act, 1986.

Directors Liabilities – Are Shareholders Liable for Company debt?

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?

What else are directors personally responsible for?

A company director’s liabilities extend beyond the company’s debt. Occasionally, the director will be personally liable alone. Other times, they can be jointly responsible alongside the company.

Directors Liabilities and Misrepresentation

If a company director deliberately causes a third-party financial loss, they may be required to reimburse those losses.

Acting beyond company authority

Company directors remain limited to acting within their authority. The company’s articles of association outline such an authority. Should a company director overstep that authority to the detriment of the company, they may be personally liable to repay the company financially.


Disqualification and Directors Liabilities 

A disqualification order may expose you to the director’s liabilities, as it will ban an individual from acting as a company director for 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 debt of the company.

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

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