33. Limited Liability of Companies

Warning 33
In the “good old days” a man could form a company for his business and be assured of reasonable protection against creditors, in the event of things going bad. He had limited liability and was liable only for the money still unpaid on his shares. This protection has been severely eroded over the last few years.

Nowadays directors, shareholders and their relatives can be personally liable in certain situations. For example,

  1. Directors can be liable if negligent in running the business.
  2. Directors can be liable if they fail to keep proper records and this contributes to the company’s failure.
  3. Companies with related shareholdings can be attacked by the liquidator of an insolvent brother company.
  4. Family members related to shareholders and directors can sometimes be liable.