Director Liabilities

Director Liabilities

As a director of a company you are duty bound to act in the best interests of the company and exercise reasonable care, skill and diligence.

A director is always responsible for his/her own actions but cannot be held personally responsible for any debts the company may have unless one of the following applies:

  • They have signed a Personal Guarantee

  • An overdrawn Director's Loan Account

  • Disposing of company assets at undervalue or no value

  • Paying shareholders whilst the company is insolvent

  • Director misconduct - usually defined under Section 213 & 214 of the Insolvency Act 1986

    • Fraudulent Trading - With the intent to defraud creditors of the company - this also being a criminal offence and could lead to imprisonment depending on the severity

    • Wrongful Trading - Knew or ought to have concluded that there was no reasonable prospect that the company would go into liquidation but continued to trade whilst insolvent

 

Other types of Wrongful Trading include:

  • Not filing annual returns or accounts

  • Continuing to take credit from creditors without any reasonable prospect of repayment

  • Taking excessive salaries or dividends

 

It is very important to seek professional advice when it comes to Director Liabilities and especially Directors Misconduct as this is a very serious issue but quite a grey area.

 

For help on this and other matters please feel free to contact us.