I am the director of a private limited company and I have been reading about separate legal personality and limited liability to try and identify what I need to watch out as a director of a company in terms of protecting myself from liability.
What are the limits of Separate Legal Personality and Limited Liability? Can you please touch on the company directors’ disqualification act 1986, the government make directors liable, company contracts, agency and the actions of a fraudulent company.
The Answer from Solicitors Online
There are certain circumstances in which a private limited company, shareholders and directors will not be protected by the principle of separate legal personality and limited liability.
The Company Directors Disqualification Act 1986
Under section 15 of Company Directors Disqualification Act 1986 a person who is involved in the management of a company while being a disqualified director will be jointly and severally liable with the company for debts incurred by the company during the time that they were involved in it’s management.
To get a limited liability company your must first register your company with Companies House. Companies House is the official registrar of UK companies.
The UK Parliament can intervene to remove the protection of separate legal personality and limited liability from a company if they find it necessary to do so for the purpose of justice.
If a person setups up a company, arranges a loan from a bank and agrees in the loan agreement, that he will be personally liable for the loan then he will not be protected by the principle of separate legal personality and limited liability.
The bank will be able to pursue him in court for the money borrowed, if the company defaults on the loan.
When a company acts as agent of a person by signing a contract as their agent, resulting in the person being legally bound to the contract signed by the company. The principle of separate legal personality and limited liability will not protect the person from being contractually obliged to fulfill the terms of the contract.
When a company has been set up for the purpose of fraudulently avoiding debts owed to others, such a company would be regarded as a sham or pretense, and will therefore not enjoy protection of separate legal personality or limited liability.
If you need legal advice online on the limited liability of a company and it’s separate legal personality, you can speak to our Solicitors online right now.