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Directors liability with a limited company

Limited companies appear more professional than a sole trader outfit, it also gives additional security to the directors such as limited liability. Therefore, the finances of the directors and owners are separate to their private finances. This means that all profits belong to the company, not anyone individual.


Liabilities in business are a debt that your company is responsible for. A liability could take the form of taxes, invoices from suppliers, or any loans. Generally, a limited company’s debts would not be the responsibility of any of the directors, since the company is a separate legal entity and is solely responsible for any debts incurred. However, there are some circumstances where the director is accountable. If it is deemed that the directors have acted inappropriately then the debt will be the directors responsibility, making it completely separate from any debts accrued by the business.


The main issues are where a director has a loan account with the company, inappropriately sold company assets, acrrued fraudulent debt, signed personal guarantees or used company money for non-business activities.


When a company is in trouble, all assets of the company are used to pay off any outstanding debts, if a company is in liquidation, an insolvency practitioner will sale company assets to pay off remaining debts and will deal with any mandatory steps to officially close the business.

If the company doesn’t possess enough assets, compulsory liquidation can be requested by way of a court order, and if there’s no assets a request can be made to strike off the company.


Acer Accounts can assist you with queries relating to Directors Loan accounts or any other taxation issue, year-end accounts, self-assessment, bookkeeping, accounting or payroll issues.

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