Legal advice for company directors

Being a company director can be complex, and when a company is in financial difficulty it comes with the risk of being held personally liable for debts or losses to the company, director disqualification and criminal prosecutions. If you are facing challenges as a company director, JMW can help. We offer professional advice on your legal obligations regarding a company’s solvency, and can support you with the high levels of competence and knowledge that are expected of directors. This can help you to meet your legal obligations and avoid the serious consequences of failure in this area.

The experienced team of corporate solicitors at JMW offers practical, specialist advice to directors or former directors on a wide range of issues, including obligations, responsibilities and liabilities. While the corporate structure usually provides a layer of protection, tailored legal advice can minimise the risk of personal liability for directors.

Whether your business is facing financial difficulties or you are involved in a high-stakes corporate transaction, our specialist lawyers offer the direct, innovative support you need to fulfil your legal requirements, avoid conflicts of interest, handle disputes and prevent reputational damage.

To speak to a solicitor about our company director services, call us on 0345 872 6666, or fill in our online enquiry form to request a call back.

How JMW can help

JMW's team prides itself on being able to offer clear and concise legal advice for company directors. We advise on everything from corporate governance and risk management to Companies House reporting obligations and defending claims of breach of duty, all under a changing legal landscape for directors.

Our services include:

When legal issues arise, our approach is always tailored to your unique requirements, duties and obligations, with specific advice on the options available to you and with legal representation in any court proceedings that arise. Our team's practical business experience means that we can offer directors advice on the long-term consequences of any potential actions, and the risks associated with personal guarantees or other considerations.

As a full-service law firm, you can also benefit from support from JMW's employment law team (where employee interests or employment law are relevant to your circumstances), and from our media and reputation management team if the circumstances draw public attention.

Meet our team

The experienced corporate solicitors at JMW have a strong track record of success in supporting company directors, from ongoing compliance through to insolvency challenges. With a wealth of experience and a multidisciplinary team, we will tailor our services to your specific needs.

What are the legal duties for directors under the Companies Act 2006?

The Companies Act 2006 codifies the legal duties that all company directors must follow. These duties apply to all directors, including non-executive directors and shadow directors. Adherence to these obligations is essential to avoid allegations of misconduct or negligence, and you should seek advice from our team if you face any suggestion of non-compliance.

The seven core duties include to:

• Act within your powers by following the company's articles of association
• Promote the success of the company on behalf of stakeholders and acting in good faith
• Exercise independent judgment and avoid subordinating decision-making to the will of others
• Exercise reasonable care, skill and diligence, and perform your role to the standard of a reasonably competent person with your specific knowledge and experience
• Avoid conflicts of interest, whether direct or indirect
• Not accept benefits from third parties that could influence your independent judgment
• Declare interest in any proposed transactions or arrangements and maintain transparent communication

Failure to adhere to these duties can result in serious long-term consequences, including disqualification, criminal prosecution, or becoming personally liable for losses sustained by the company.

Legal advice on a director's duties can enable you to act within these requirements and support your compliance, which will minimise any risk of legal proceedings. Our team can also provide a legal defence in cases where you are prosecuted for alleged misconduct.

When are directors personally liable?

Company law usually protects directors from being held responsible for company debts, but personal liability can arise in several scenarios. This is a particular risk if professional advice is not sought when a problem first emerges.

Proactive engagement with our legal specialists is the most effective way to ensure personal assets stay protected when your business faces insolvency proceedings or a financial dispute.

Directors can be held personally liable for:

• Breaches of fiduciary duty: If you prioritise personal interests over the company or its shareholders, you may face civil claims.
• Wrongful trading: If you continue trading when there is no reasonable prospect of avoiding insolvent liquidation, you may be ordered to contribute to the company's assets.
• Personal guarantees: Many directors sign personal guarantees for business loans or commercial leases. If the company defaults, the lender can pursue you personally.
• Tax liabilities: In cases such as the deliberate non-payment of National Insurance or VAT, HM Revenue & Customs can seek to recover funds from directors directly.
• Health and safety breaches: If a workplace injury occurs due to gross negligence, directors can face individual charges.

The risks do not begin when an insolvency practitioner arrives. Legal advice and guidance early in the process can protect you for the future, and the team at JMW can regularly review your position and implement robust risk management strategies to prevent these issues from escalating. By helping you to exercise reasonable care at every stage, we minimise the risk of creditors or shareholders bringing personal claims against you.

Q

Can a director be held liable for actions taken before they resigned?

A

Resigning from a board does not provide immunity for past actions. You remain legally responsible for any acts, omissions, or breaches of duty that occurred during your tenure. If the company enters insolvency, a liquidator can still investigate your conduct during the period you were an active director.

Q

How do director duties change when a company is nearing insolvency?

A

When a company is insolvent, or at risk of becoming insolvent, your primary duty shifts from promoting the success of the company for its shareholders to protecting the interests of the creditors. Failure to make this shift can lead to personal liability for "wrongful trading" if you continue to incur credit while knowing the company cannot avoid liquidation.

If trading continues while the company is insolvent and without a clear plan, you risk accusations of misfeasance or fraudulent trading. A misfeasance claim can be brought against a director who has misapplied company money or property, or breached a fiduciary duty. If successful, the court can compel the director to repay the money or contribute to the company's assets, so it is vital to recognise the risk of insolvency and respond accordingly.