Directors Liability of Company ceased Trading ?

Question

Both myself and my Husband were Directors of our Limited Company which we had ceased trading due to gathering debts and a bit of mis judgement. We have been informed that we are liable to pay debts, which would take us till our pensions day. My bugbear is this Ltd. business, what does it really mean, what are the benefits, of starting a ltd co up and basically am I gonna be poor for the rest of my life. Help me please, as my health is fading fast, I'm already on Lithium and effexor, and Sleeping tabs.

Answer 1

You should not be liable for the company's debts, unless you have traded fraudulently.

Your only liability should be to the extent of unpaid calls on any share capital you have.

However, if you gave personal guarantees of the company's debts - and many banks won't lend to a company without this - you will be personally liable on these

Answer 2

A lot of people seem to believe that a Limited Company means the owners are exempt from the debts of said company.

WRONG!!!

For some charges, the owners become liable for these debts, but not all.

The limited Company is a legal entity in its own right and can have more powers than that of a Business, but the Owners are still responsible for running, and for the consequences if things go wrong.

The regulation were changed about 3 years ago as too many people were starting up LLCs, building up debt, and then closing off and leaving debtors hugely out of pocket.

Best thing in this situation is to get an Insolvancy order (Not a bankruptancy order) via a solicitor, which should releive some of the situation.

Answer 3

The primary benefit of a LLC (Limited Liability Corporation) is that you and the business are separate "persons" from a legal point of view. And that "limited liability" is meant to give you some personal protection from any judgments against the corporation. Example: an employee of the business drives to make a delivery, has a disastrous auto accident, and the total damage comes to, say, $1.5 million. In this case, the corporation is liable for the damages, but the owners are shielded from this by the LLC status of the firm.

But when this comes to "gathering debts," the LLC may not provide you with this sort of shield. The big question is whether you signed personally to cover the obligations of the corporation.

Example: you purchased a large opening inventory with a bank loan. Likely, the bank required you to sign the note twice: once as owner of the company, and another line in which you "guaranteed" the note if the corporation could not pay. In that case, the LLC does not provide any protection.

I'm not sure about one thing -- you indicated that the firm "ceased trading" due to the problems. Was the firm a publicly listed (traded) firm on one of the NASDAQ markets? This may alter the answer about your liability.

Best advice is this: Don't take sleeping pills a night longer. Get a good attorney to sort all this out. And, you likely won't "be poor the rest of your life." There are solutions to this problem, including filing bankruptcy.

Things will get better. Just be sure to get the legal help you need.

Good luck.

Answer 4

A limited company has limited liability. Legally it is a separate entity from you as a person. Any debts the company has are solely those of the company and cannot be transferred to you personally - even if the company cannot pat the debts.

There may be exceptions though - for example if you personally offered any guarantees. Additionally if you, as directors, failed to fulfil the responsibilities of a director you can be barred from future directorships, and if your failure to fulfil the directors duties led to the debts occurring you personally can be pursued through the correct legal means. But anyone pursuing you will have to prove to a court that your failure to carry out your director duties lead to their loss.

Answer 5

As a Limited Company you should have the protection of Limited Liabilty. This means that your old company is an entity in itself and it is that entity that is liable for all losses.

You need to seek legal advice to clarify this but I don't see why should are personally liable if everything was set-up correctly!

Answer 6

Depending on how the company is incorporated and the financing has been aquired, the funds to pay oustanding debt normally would come from and be limited to, the liquidation of company assets. However, all that should be handled by a bankrupcy court, under chapt. 11.

All that is, unless you took out a personal loan to finance the company. In that case you are required to continue to make your payments on that loan.

Answer 7

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