Question: What personal liability do I have as director of my company?Answer:
A director of a company can be made personally liable if the company becomes ‘insolvent’ or has incurred a significant amount of debt, and if a court can prove that there has been ‘wrongful trading’ on the part of the director.
This involves finding out whether the director had reasonable knowledge of the company’s financial shortcomings and the unlikelihood of avoiding insolvent liquidation. If they did not take steps to minimise the loss to creditors they may be found of wrongful trading and be personally liable for losses.
Directors of companies are bound by the Corporations Act 2001. For a full list of director duties and potential breaches see our article.