Last reviewed 28 September 2026
Generally, no: a limited company is a separate legal person, so its debts belong to the company rather than its directors. However, directors can become personally liable where they have signed a personal guarantee, breached their duties to the company, continued trading when insolvency was unavoidable, acted fraudulently or dishonestly, or fallen within specific statutory regimes such as certain tax and health and safety rules.
Claims against directors most often arise when a company fails and an insolvency practitioner reviews what happened, or when shareholders fall out and one side alleges the board acted improperly.
Personal guarantees
The most common route to personal liability is contractual. Lenders, landlords and suppliers often ask directors to guarantee the company's obligations. If the company defaults, the creditor can pursue the director personally under the guarantee. Read guarantee wording carefully, including whether it is capped and whether it continues after you leave the board.
Breach of directors' duties
The Companies Act 2006 sets out general duties owed by directors to the company, including acting within powers, promoting the success of the company, exercising independent judgement, reasonable care, skill and diligence, avoiding conflicts of interest and not accepting benefits from third parties. A director who breaches these duties can be required to compensate the company or account for profits.
The claim belongs to the company, so it is usually brought by the board, a liquidator or administrator, or in limited circumstances by shareholders through a derivative claim with the court's permission.
Wrongful and fraudulent trading
Under the Insolvency Act 1986, a liquidator or administrator can ask the court to order a director to contribute to the company's assets if the director knew, or ought to have concluded, that there was no reasonable prospect of avoiding insolvent liquidation or administration and did not take every step to minimise loss to creditors. This is wrongful trading.
Fraudulent trading, carrying on business with intent to defraud creditors, can lead to both civil liability and criminal prosecution. When a company is in financial difficulty, directors' focus shifts towards the interests of creditors, and taking early professional advice is important.
Disqualification
Under the Company Directors Disqualification Act 1986, a director whose conduct makes them unfit can be disqualified from acting as a director for a period. Compensation orders can also require a disqualified director to pay for losses their conduct caused to creditors.
Tax, regulatory and other statutory liability
In some circumstances HMRC can make directors personally liable for certain unpaid tax, for example where failures result from fraud or neglect. Directors can also face personal liability or prosecution under health and safety, environmental and some consumer protection laws where offences are committed with their consent, connivance or neglect.
Reducing the risk
Keep proper board minutes showing how significant decisions were reached. Declare conflicts of interest. Monitor the company's financial position regularly, and take advice early if solvency is in doubt. Negotiate limits on personal guarantees. Consider directors' and officers' insurance, reading what it covers and excludes.
Good company records help directors show that decisions were properly made. Our company secretarial work includes maintaining minutes, resolutions and statutory registers.
Shadow and de facto directors
Liability is not limited to people formally appointed at Companies House. Someone who acts as a director without appointment, known as a de facto director, or a person whose instructions the board is accustomed to follow, known as a shadow director, can owe duties and face the same claims. Founders who step off the board but keep directing the business, and investors who control day-to-day decisions, should bear this in mind.
Key points
- Limited liability usually protects directors from company debts.
- Personal guarantees are the most common route to personal liability.
- Breach of duty and wrongful trading claims often follow insolvency.
- Good minutes and early advice reduce the risk.
Frequently asked questions
- Can a creditor sue a director directly for a company debt?
- Not usually, unless the director gave a personal guarantee or a specific legal exception applies. The debt is normally owed by the company alone.
- Are non-executive directors personally liable too?
- Yes, the general duties apply to all directors, including non-executives, although what is expected in practice can depend on their role and knowledge.
- Does resigning as a director end my liability?
- Not for past conduct. Resigning does not remove liability for decisions made while you were a director, and personal guarantees may continue unless released.