Directors of companies for many years sheltered behind the company and avoided personal liability if things went wrong.

Law changes and Court decisions have made Directors and others who manage companies (in a role like a Director, but not necessarily a Director) personally liable for company debts and obligations.

Directors who previously thought their personal assets to be safe from a company collapse have found those assets seized to pay company debts where they have retained control over the operationsof the company.

This has most commonly happened where trading has been carried on recklessly or the company was known to be unable to pay its debts as they arose.

Even people who are not Directors or Shareholders but who act in a shadow Director role for example General Managers can be made liable.  Who can be held liable will depend on the role they play in making decisions.  Who exercises the real power and authority may not be those listed as Directors, but they are the ones being held liable.

In a case we are aware of, a company went into liquidation due to its inability to pay its debts.  The Liquidator found the company’s accountant was the person responsible for setting up the company.  The Directors listed were fictitious people and the shareholders registered were the accountant’s wife and children who were unaware of the company structure.

Furthermore, the company was solely set up so the accountant was able to borrow money without having the intention to repay the funds.

The Court held that the liquidator was entitled to go behind the company structure and collect property from the accountant personally as the company was deemed to be a sham.  The company was never set up properly, it was trading recklessly and the accountant was made bankrupt.