Can a director of a limited company be held personally liable for debt?

Brodie

I have a tribunal award judgment against my former employer, but they haven't paid. The directors did not co-operate with the tribunal process and have now applied for the company to be struck off the register. This has been suspended though as an objection has been raised. Although the money could be chased through the county court, this seems pointless as the company was a sham, the director knew what he was doing and knows how to cover his tracls and the company has no assets, etc. Does anyone know if the director could be held personally liable for the payment as he was knowingly trading insolvently?


Thanks for any advice.

CIS

There are cases in which the directors can be held liable for debts incurred by a limited company but you would need a solicitor who specialises in business law(or an accountant) to advise you further.

Anihilator

Directors if trading knowingly whilst insolvent can become liable however as said you really would need to go for specialist advice.

Equaliser123

Sadly not in this case.

somethingcorporate

Equaliser123 wrote: »

Sadly not in this case.

Did you want to supply some info to back that up?

Fraudulent trading is one of the only reasons for lifting the veil whereby directors can become personally liable for debts of the business. The problem is proving this which can be a tricky and expensive business!

Tozer

somethingcorporate wrote: »

Did you want to supply some info to back that up?

Fraudulent trading is one of the only reasons for lifting the veil whereby directors can become personally liable for debts of the business. The problem is proving this which can be a tricky and expensive business!

For a start, fraudulent trading is extremely difficult to actually prove as you rightly say.

It sounds as though the situation here is that the company has become insolvent after the Tribunal award. That isn't in itself evidence of wrongful or fraudulent trading.

What may be more relevant is to determine the type of winding up. If it is a solvent voluntary winding-up, then, if there is an unsatisfied award to be paid, the directors cannot sign the necessary statutory declaration as to solvency.

Brodie

Tozer wrote: »

It sounds as though the situation here is that the company has become insolvent after the Tribunal award. That isn't in itself evidence of wrongful or fraudulent trading.

What may be more relevant is to determine the type of winding up. If it is a solvent voluntary winding-up, then, if there is an unsatisfied award to be paid, the directors cannot sign the necessary statutory declaration as to solvency.

Hi,

Thanks to all who've commented.

Just to clarify on a couple of points made...One of the reasons I made the tribunal claim was that the director did not pay staff, nor make them redundant or dismiss them so as to avoid redundancy payments, etc. The company did not have a bank account, the director was funding it personally and then decided to pull the plug. To my knowledge, no sales invoices were raised during the time staff were there, although the director bought goods and services, which, as far as I know he also didn't pay. He knowingly allowed staff to continue working for him without the means, so he said, to pay wages. Staff had been transferred to the company via TUPE from a previous company of which the said director of the new company was also a director, so, on paper, the company was solvent, yet in reality, it had no money.

The director has applied for the company to be struck off, although this has been suspended.

pmduk

I really think you need to take professional legal advice in this specialised area.

Equaliser123

Brodie wrote: »

Hi,

Thanks to all who've commented.

Just to clarify on a couple of points made...One of the reasons I made the tribunal claim was that the director did not pay staff, nor make them redundant or dismiss them so as to avoid redundancy payments, etc. The company did not have a bank account, the director was funding it personally and then decided to pull the plug. To my knowledge, no sales invoices were raised during the time staff were there, although the director bought goods and services, which, as far as I know he also didn't pay. He knowingly allowed staff to continue working for him without the means, so he said, to pay wages. Staff had been transferred to the company via TUPE from a previous company of which the said director of the new company was also a director, so, on paper, the company was solvent, yet in reality, it had no money.

The director has applied for the company to be struck off, although this has been suspended.

If he has applied for it to be struck off then the chances are it is a voluntary winding up. You need to check with Companies House Webcheck service.

pmduk

It might be worth listening to last Sundays McIntyre investigates on five live. Available via iplayer or podcast. There was a lawyer talking about a similar situation.