Can I Be Held Personally Liable For My Company’s Debts?

There are circumstances where directors of companies in financial trouble can be held personally liable for debts incurred by the company.  The main area of risk for directors relates to wrongful trading.  This is a complex area, but here are some simple rules to follow to ensure you avoid allegations of wrongful trading are:

• Ensure you always have adequate and timely financial information
• Be alert to danger signs, such as pressure from creditors
• Draw conclusions from the circumstances that a reasonably prudent business person would
• Hold regular board meetings to discuss / review the company’s situation
• Ensure you consider the interests of creditors
• Make sure you comply with your statutory directors’ duties
• If there is a prospect of insolvency, do not incur new liabilities
• Record conclusions
• Take specialist, professional advice and consider it carefully and follow it – unless there are very good reasons not to
• Consider stopping trading and starting appropriate insolvency proceedings before creditors do