Directors'responsibilities

6. Potential Penalties

Exercise your directors' responsibilities carefully as the penalties for failing to do so can be formidable.

6.1 Even in a limited liability company, you could be held personally liable for losses resulting from some acts or omissions.

• These include illegal acts and acts beyond your powers or undertaken with insufficient skill and care (see 2).
• You could be liable to contribute for company debts incurred through wrongful or fraudulent trading.

6.2 Directors can be jointly and severally liable for the consequences if they act collectively in breach of their responsibilities.

• Liability could be unlimited, so you could be made bankrupt as a result of decisions of the other directors, even in a limited liability company.
• If you disagree with the decisions being made, have it noted in the minutes, including your reasons for disagreeing.

6.3 You could be disqualified from acting as a director for some types of conduct.

• They include continuing to trade when the company is insolvent, failure to keep proper accounting records, failure to pay tax and failure to co-operate with the official receiver.
• Disqualification lasts from two to 15 years.

6.4 Some actions could result in criminal convictions.

• They include failure to keep proper accounting records, fraudulent trading, health and safety shortcomings and misappropriation of company funds.