My Company Is About to be Liquidated - As It's Director, Am I Personally Liable?

Directors can be held personally liable for their company’s debts, even though their company is a separate legal entity. This is why it is absolutely essential to seek expert legal advice on this matter immediately and not leave anything to chance.

As a Director, you will need to ascertain whether you have participated in any of the following scenarios:

  • Did you enter into any debts on behalf of the company when it was considered insolvent? For example, did you incur a new debt when aware there were problems with making loan repayments on time? Or there was low cash flow and operating profits from the business?
  • Did you incur a new debt despite knowing the company had received threats of legal action from creditors to whom money was owed?
  • Have you breached your duty of care and diligence to your company by failing to question or investigate the company’s financial affairs?
  • Have you provided any personal guarantees for your company’s liabilities, such as a mortgage over your house to secure the company’s repayment of a loan?
  • Does your company act as a trustee for any trusts? If so, has the company breached any terms of the trust?
  • Have you started a new company with largely the same directors as the insolvent company, under a new business structure, leaving no assets to pay creditors?

If you answered “Yes” to any of the above examples, you may be personally liable for your company’s debts.  If you are found to have breached any of your Directors’ duties as set out in the Corporations Act, criminal proceedings may also be brought against you by ASIC or the Commonwealth DPP. You may also be personally liable for any claims of loss of employee entitlements, including Superannuation and unpaid PAYG.

If you are a Director of a company that is about to be liquidated, you may be feeling overwhelmed and anxious. The most important thing for you to do is mitigate your personal liability as much as possible. The experts at PMF Legal will assess your situation and advise as to your likely personal liability, and your legal options.