Can a director be held personally liable for company debts?

Generally, a company is a separate legal entity, so directors are not personally liable for the company's debts. However, there are important exceptions where the corporate veil can be lifted and a director held personally accountable, such as fraud or specific statutory defaults.

Key points

• The principle of limited liability means directors are usually not personally liable for company debts.
• Personal liability can arise where a director gives a personal guarantee for a company loan.
• The corporate veil may be lifted in cases of fraud, misrepresentation, or using the company for improper purposes.
• Directors can face personal liability for certain statutory dues (e.g. specific tax or employee dues) and for fraudulent trading.
• Breach of fiduciary duty or wrongful conduct can also expose a director personally.

Relevant law

The separate legal personality principle stems from company law and Salomon v. Salomon. Directors' duties and liabilities are in Sections 166 and 447 of the Companies Act, 2013. Fraudulent conduct attracts Section 339, and the corporate veil may be lifted by courts in appropriate cases.

What you can do

• Review whether you have signed any personal guarantees for company loans.
• Ensure the company complies with statutory dues to avoid director liability.
• Maintain proper records showing you acted in good faith and within your duties.
• Consult a corporate lawyer in Siliguri to assess your specific exposure.