Company directors should be aware that their position does not preclude them from the possibility of being personally sued. While a limited liability company offers some protection, the responsibility of the role brings with it a legal duty of care that must be always adhered to. Here we go into more detail about what a company director could be held personally responsible for in court.
What can directors be made personally liable for?
There are several circumstances that could leave a director open to being sued. This could include everything from unpaid debts to contractual breaches and there can be instances where a director is made liable alongside the company. Some examples of where a director may be personally liable include:
Third party contracts
Personal liability may be attributed to a director who has entered a contract with a third party without making it clear they are doing so on behalf of their company.
Breach of duty
A company’s Article of Association will detail the limits of a director’s authority. If this is exceeded to the detriment of the business, the director could be held personally liable for any losses incurred.
Personal guarantees
Lenders could enforce against a director’s personal assets and property if a personal guarantee to pay a company loan has not been met.
Unpaid shares
A director may have to pay outstanding share amounts that they are personally liable for if a company is wound up or becomes insolvent.
Misrepresentation
Statements made by a director that are known to be untrue and are relied upon by another party to their detriment, could lead to the director being made personally liable for any financial loss suffered.
Ignoring court orders
If a director knows of an existing court order related to the company and wilfully ignores it, they could be held personally liable for contempt of court.
Data protection breaches
Offences made under data protection laws that can be proved to have occurred with the director’s consent could see them held liable along with the company.
Wrongful trading
If a company is insolvent and the director continues to trade, they may be ordered to repay any assets back to the other company involved in the transactions.
Pension schemes
When a pension scheme is wound up and a contribution notice has been served by the regulator, a director could be held liable for a debt due under section 75 of the Pensions Act 1995.
Health & Safety
A director could be prosecuted personally if they breach a health and safety law. This could include fines or even go as far as imprisonment, depending on the severity.
How to sue a company director
The thought of suing a director can seem daunting, so it is important to be organised and aware of the challenges you may face. If you want to sue a company director, you should first:
- Identify who you are suing so the claim is made against the correct person.
- Make a compelling claim for your case by listing the damages you have experienced, covering things such a time lost, mental health and financial impact.
- Collect as much evidence as possible to present to the court.
- Assess whether mediation is possible – if the other party is willing to negotiate a settlement that works for you it could help you avoid going to court.
- Consult specialist commercial litigation lawyers who can put together a strong case that increases your chances of winning a legal judgement. Specialist lawyers can also assist in mediating and settling any potential claim.
Get in touch
To learn more about your liability as a company director or if you want to pursue a claim against a company director, call us on 020 3588 3500 or leave your details here and we’ll be happy to provide the help and advice you need.