Andrew Frake
Associate, Dispute Resolution

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Directors' personal liability

Directors' personal liability

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Andrew Frake
Associate, Dispute Resolution

andrew.frake@asb-law.com

Directors' personal liability

We can help you reap the benefits of trading through a limited liability company, so that liability sticks with the company and does not affect you personally.

People don’t go to university to study the ins and outs of becoming a company director; directors tend to learn on the job.  And a director who is good at innovation or sales might not be so good at financial management, or dealing with regulatory or human resource issues. So it’s hardly surprising that mistakes happen.

The problem is that simple mistakes may result in personal liability if the company goes into administration or liquidation.

Additional risks when your company is no longer viable

Directors become subject to additional obligations once a company gets into financial difficulty, which give rise to personal risk. For example:

  • If you carry on trading and worsen the position of creditors, you could face an action for wrongful trading.
  • If you have personally given assurances to a supplier that they will be paid, you can be liable if the company does not pay. 
  • If the company carries out a transaction that is later considered to be inappropriate, or if you “prefer” certain creditors (i.e. pay some creditors but not others), you can be personally liable for allowing that transaction or payment, even if you did not personally benefit. 
  • You might even be liable to HM Revenue & Customs if the company has not been paying National Insurance Contributions for an extended period.

Our experience means we can advise you at each of the three key stages and give you the maximum protection from personal liability.

If your company becomes unable to pay its debts as they fall due, then you need help from someone whose expertise goes beyond ticking the right legal boxes. We will advise you in such a way that the decision making is left to you, in the knowledge that the courts will seldom criticise those who make honest judgments based on an appropriate assessment of the situation.  

We know how worrying and distracting it can be if the business enters formal insolvency, and personal claims are made. We also know that your budget will be limited and you will want an early resolution to enable you can get on with your life.

Our experience makes us the perfect law firm to devise the best defence strategy and we'll deliver a detailed cost-benefit analysis from the outset so that you have a clear idea of costs and likely outcome.

Andrew Frake, Associate, Dispute ResolutionFor more information on directors' personal liability and to start a conversation on how we can help you please contact Andrew Frake, Associate, Dispute Resolution.

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