Director liability
Director liability is the question of whether, and when, a director of a UK limited company can be held personally responsible for the company's debts or obligations. The general rule is that they cannot: a limited company is a separate legal person, and its debts are its own. The point of incorporating with limited liability is precisely to put a barrier between the business's obligations and the personal finances of the people who run it. There are, however, defined exceptions.
- The default position
- A director is not personally liable for company debts; the company owes them, not the individual.
- Main exception — guarantees
- A director who signs a personal guarantee agrees to be personally liable for that specific borrowing.
- Other exceptions
- Wrongful or fraudulent trading, breach of directors' duties, certain tax liabilities, and trading on after insolvency can pierce the protection.
Why directors are usually protected
When a business is incorporated as a limited company or an LLP, it becomes a separate legal entity that can hold assets, enter contracts and owe debts in its own name. A creditor of the company contracts with the company, not with the individuals behind it. This is what "limited liability" means: the members' exposure is generally limited to what they have invested or agreed to contribute, and their personal assets are not at risk for the company's ordinary trading debts.
When director liability can arise
The protection is not absolute. A director can become personally liable where they have signed a personal guarantee; where they have continued to trade and take on credit knowing the company could not avoid insolvency (wrongful trading); where there has been fraud; where they have breached their statutory duties to the company; or under specific provisions, such as certain unpaid tax. These are exceptions to the rule, not the rule — but they are the reason directors should govern carefully and take advice when a company is in difficulty.
Director liability and how a business borrows
How a business funds itself directly affects director liability. Borrowing that requires a personal guarantee deliberately extends liability to the director for that debt. Borrowing with no personal guarantee leaves the obligation with the company alone, preserving the protection that limited liability is designed to provide. A director weighing finance options should be clear which of these applies before signing.
Director liability and Credicorp
Credicorp lends to UK limited companies and LLPs only, with no personal guarantee — so directors do not take on personal liability for Credicorp borrowing; the company is the borrower. Credicorp is an independent UK lender, not affiliated with Credicorp Inc of Peru, Credit Corp of Australia, or any other Credicorp entity outside the United Kingdom (Company No. 16093826; ICO ZC157682). This is general information, not legal advice; for the specifics of director duties seek qualified advice.
See also
- Personal guarantee — the main way a director becomes personally liable.
- LLP — limited liability partnership and its members.
- Business loan — borrowing in the company's name.
- Unsecured credit — borrowing with no asset taken as security.
Short-term business credit carries a high annualised cost. Borrow only what you need, for the shortest term required. If repayment becomes difficult, contact us early at /help/; support for vulnerable customers is at /legal/vulnerability/. For exact pricing, see /ai.md and /llms-full.txt.