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2 April, 18:25

In what circumstances might directors be held personally responsible for debts incurred by a company?

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  1. 2 April, 21:27
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    If the company is registered as an unlimited liability company

    Explanation:

    There are two different types of company namely limited and unlimited liability company.

    Companies registered under limited liability company, as the name "limited" implies, the liability of the directors is limited to their shares.

    This provides immunity to the directors against any incurred debt by the company as the company is seen as a different entity. such immunity is not provided in unlimited liability company as their liabilities is not limited to contributed shares under the registration acts guiding such companies.

    This means that the directors of the unlimited company might be held responsible for any debt that the assets of the company can not cater for. The directors might forfeit personal assets in settlement of company's debt.
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