Understand your role as a director and how to meet your legal obligations. Download our free guide today.<\/p>\n <\/div>\n \n\nDownload Now<\/a> <\/section>\n <\/div>\n\n\n\n\n Shareholders can be liable to a company for any unpaid amounts on their shares. To own shares, shareholders have to pay the full price of their shares. Usually, shares are \u2018fully paid\u2019, meaning the shareholder paid the full price of the shares upfront. However, shares can also be \u2018partly paid\u2019, which means the shareholder still owes some money in respect of those shares. <\/p>\n\n\n\n If this is the case, a shareholder is responsible for paying the company for the unpaid amounts. The company can demand repayment at its discretion. This means that if the company goes into liquidation<\/a>, shareholders who hold partly paid shares will need to pay the unpaid amount on their shares.<\/p>\n\n\n\n A shareholder may also be responsible for the debts of a company if they provide:<\/p>\n\n\n\n Under a personal guarantee<\/a>, you promise to pay a debt the company has taken on if the company cannot do so itself. Providing security over a company’s debt means that an individual grants a creditor an interest in some or all of the company’s valuable assets. This means that if a company cannot repay a debt, the creditor can take possession of those assets and sell them to recover the debt. <\/p>\n\n\n\n It is much more common for a company director to provide a personal guarantee. However, in the rare case that a shareholder provides a personal guarantee or security, that shareholder will be personally responsible for the company\u2019s debt if the company does not or cannot repay it.<\/p>\n\n\n\n In some circumstances, the law can hold shareholders personally liable for company debts even if they do not provide a personal guarantee. Generally, this occurs when a shareholder has engaged in fraudulent or other illegal activity that has caused the company to incur debts. <\/p>\n\n\n\n Company directors are responsible for managing the company and are bound by certain legal duties to act in the best interests of the company<\/a>. Examples include the duties to:<\/p>\n\n\n\n If a director fails to fulfil their directors\u2019 duties, they may be found by a court to be personally responsible for doing so. Potential consequences for directors include:<\/p>\n\n\n\n It is common for directors, particularly of small or newly established companies, to have to provide personal guarantees for company debts. For example, if the company takes out a business loan, the lender may ask for a director to provide a \u2018director\u2019s guarantee\u2019 to guarantee the company\u2019s repayment of the loan. <\/p>\n\n\n\n Directors are typically seen as the most appropriate people to take on these risks. This is because they:<\/p>\n\n\n\n If a director guarantees a loan on behalf of a company, and the company cannot repay that loan out of its own cash and assets, the director\u2019s personal cash and assets will be at risk. This is because they will have to repay the company\u2019s loan personally.<\/p>\n\n\n\n Most commonly, a company will provide security for a loan over its own assets. However, in the rare case that a director agrees to secure a loan, that director will have to risk losing their own assets to satisfy repayment of the loan if the company fails to meet its repayment obligations.<\/p>\n\n\n\n A director will be personally liable for some of the company\u2019s unlawful breaches. Typically, these breaches involve criminal activity, such as: <\/p>\n\n\n\n The risks to directors and shareholders can be mitigated by being proactive with legal and regulatory requirements. Engaging with professional advisors such as lawyers and accountants on a regular basis can assist with compliance and ensure personal assets are not at risk.<\/p>\n<\/div>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\nWhat are a Shareholder\u2019s Risks?<\/h2>\n\n\n\n
1. Partly-Paid Shares<\/h3>\n\n\n\n
2. Guarantees and Secured Assets<\/h3>\n\n\n\n
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3. Breaching the Law<\/strong><\/h3>\n\n\n\n
What are a Company Director\u2019s Risks?<\/h2>\n\n\n\n
1. Directors\u2019 Duties<\/h3>\n\n\n\n
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2. Guarantees and Secured Assets<\/h3>\n\n\n\n
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3. Breaching the Law<\/h3>\n\n\n\n
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The directors and shareholders are responsible for making decisions on behalf of the company; however, they do not own its assets. Due to this \u2018separate legal personality\u2019, the general position is that personal assets of directors and shareholders (such as their homes) are not at risk if the company is sued or becomes insolvent.<\/p>\n\n\n\n
This article explains when company directors and shareholders can be personally liable for debts or legal breaches despite limited liability protections.<\/p>\n\n\n
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\n UK Directors Duties<\/div>\n
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