Who is liable for company debts?

Is the directors liable for company debts? I heard from an accountant that there is new law which made the directors liable for company debts. Is this true?

 

No

 

Did they sign a personal guarantee? A lot of creditors ask for this.

If they company doesn't pay Super etc for employees , I thought the directors were personally liable?

 

It depends.

Ordinarily no, unless the directors have given a guarantee for the relevant debt.

But you also have to consider insolvent trading laws. Directors can be liable where they permit the company to incur debts when it is insolvent.

Your accountant might be referring to the new safe harbour laws. They are meant to provide a defence to an insolvent trading claim against directors in certain limited circumstances.

Edit: A director can also be liable for Superannuation and tax liabilities of the company in some situations.

In short, if you’re a director of a company which trades, you should take proper advice about the scope of your duties.

 

A company is a separate legal person that is able to sue and be sued. It is separate from its directors and shareholders.

But directors can sometimes be personally sued if they have breached laws or caused the company to breach laws.

 

Directors of a company can be liable for company debts in some situations

1. ATO issues a Directors penalty notice for unpaid taxes (PAYG withholding) and super
2. Insolvent trading
3. Guarantees and indemnities
4. Specific laws can make Directors liable for their acts or failure to act eg traffic offences like red light cameras and failing to nominate a driver, environmental laws, workplace laws, some acts of a company eg Corporations Act etc

Directors may also be liable / resposponsible for personal acts while acting as a Director. ie false declaration, lodgement of a tax form, false misrepresentation and so on.

Its a area for legal advice. Some acts can be insured.

 

Directors can be personally liable for unpaid superannuation and unpaid Pay As You Go Withholding.

So their is a good chance that your accountant is correct if they were talking about that.

 

Not completely off the topic but the directors can be fined for trading while insolvent
High Court judgment finds four former Mainzeal directors including ex-PM Jenny Shipley and Richard Yan liable to pay $36m between them for their role in the company's collapse

 

They dont get fined. The incur massive legal costs when a liquidator / creditors take them to court and then have a judgement awarded for the extent of the insolvent trading.