Page 26 - PWM2025_JULY EBOOK

BETTER BUSINESS

All make

mistakes

It’s all well and good being elevated to the board,
but the title ‘director’ brings with it a number of
specific legal obligations and duties, breaches of
which can cause an individual personal financial
pain and possible loss of liberty, by Adam Bernstein
W shield its members and directors
Thus, as he says, a company can
hile breaches
can be deliber-
from most liabilities. However, he
ate they tend to
warns that “this protective veil can be
be more likely
through hap-
penstance – a pierced in certain limited circum-
stances”. He advises directors to con-
simple mistake or misunderstanding. sider a number of problem areas if
But apart from the risk of legal they want the protection of the lim-
jeopardy, issues may also arise as a ited liability their companies offer.
result of poor management.
The worrying part of this – and it Not acting in good faith
should be a concern for any would-be To make this particular point
director – is that there are no qualifi- Taylor refers to a legal case - Antuzis
cations required, other than being 16 v DJ Houghton Catching Services
or over and not being disqualified Limited. He says that the importance
from taking on the role. of this case is that it “confirmed the
Not unsurprisingly, given the ease principle that directors entering into
of appointment and consequent like- contracts in bad faith can be held per- to give them maximum protection for any loan taken out by the business.
lihood of a mistake being made sonally liable”. As he explains: “It was And he says this because it is often easier to pursue an individual, who has
through lack of understanding, there held that the director and sole mem- the guarantee, than enforce its security against the company.
are plenty of resources offering tips ber of the company was liable for So when a director offers a personal guarantee, they are, by definition,
on how to be a (good) director and inducing the company’s breaches of making “themselves personally liable should the company not be able to
what best practice looks like. contract where they were knowingly fulfil its obligations to the third party”.
For example, the Institute of in breach of fiduciary (duty of trust) Taylor’s best advice here is to either not give a personal guarantee at all,
Directors offers a number of or personal duties to the company.” put a monetary limit on the guarantee or link any guarantee to a specific
factsheets on the subject, Courses Consequently, Taylor says that loan.
Online offers courses on governance, “directors should make sure they
and firms such as PwC offer training fully understand not only their statu- Filing at Companies House
and support for directors. tory duties but what documents, Companies have ongoing obligations to keep Companies House updated
With the background set out, three such as any shareholders agreement with all relevant changes to the company such as the appointment or resig-
experts offer their views on traps and articles of association, set out”. nation of company officers, and to make trading disclosures about itself
ready to snare an unsuspecting direc- and the nature of its business.
tor. Voluntarily entering into personal As Taylor details: “These filing obligations vary depending on the size of
guarantees a company and whether it is public or private and directors of every com-
Paul Taylor, partner, Fox Williams Another way to pierce the corpo- pany must prepare accounts for each financial year.”
Taylor begins by noting that it’s a rate veil is for a director to have He says that where companies are delinquent, and so do not file within
well-known fact of English law that a agreed to personally guarantee or the set time, “directors can be liable for a fine of up to £5,000”, Worse, he
company has its own legal personal- otherwise secure the financial obliga- says that “a director can also be held liable to the company for any loss
ity and is therefore separate and dis- tions of a company. Taylor sees such caused by the making of a misleading statement or any omission from the
tinct from its members and directors. guarantees often requested by banks filings”.

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