Simply put, limited liability is a layer of protection placed between the company and its individual directors. This means the directors cannot be held personally responsible if the company is unable to pay its debts.
How do you disqualify a director?
A director can be disqualified for a number of reasons, including wrongful trading, fraudulent trading or ‘unfit’ conduct. Failing to adhere to your duties as a director will result in an investigation and disqualification. This guide is based on the Company Directors Disqualification Act 1986 (CDDA).
Can directors be personally liable for tax?
Company directors can only be made personally liable for the repayment of VAT tax debts if the failure to pay VAT is deemed to be deliberate and the company is insolvent or will be insolvent soon.
What happens if I am a director of a limited company?
If as a director you are found to be liable for company debts, then just like any personal debts you will be responsible for their repayment. If you are unable to repay these liabilities, then you may have to consider selling or refinancing assets.
Can a director be held liable for a personal guarantee?
If you have signed a personal guarantee, you will be liable for the debt if the company cannot meet its obligations. If, as director, you have allowed the company to continue to trade when it was insolvent or have failed in your duties as director you may lose the protection of limited liability and could be held liable for some company debts.
Can a director be personally liable for a Ltd company debt?
One of the main reasons people form a private limited company or an LLP is to limit liability for business debt. However, there are some circumstances in which you can be held personally liable, meaning the responsibility for covering the debt falls to you.
Can a director be disqualified from being a director?
In some cases, if you are found liable as a consequence of not fulfilling your duties as director, you may be disqualified and barred from being a director for up to 15 years. What help is available? If you are looking to close your company and are worried about being liable for your company’s debts.
