Are directors personally liable for a company's debts?

[dogg]

Some years ago a friend asked me to be a director in his company, just for registration reasons. Not knowing any better i agreed to it. Now the company is in debt and owing VAT and income taxes.

Am I personally liable for any of the company's debts? What should I do? I never made any money from the venture nor did i participate in its running. Any advice will be welcome

[VexXx Dogg]

Friend and business?
Oil and water.
Read the act. Get some professional help

https://www.ttbizlink.gov.tt/trade/tnt/ ... -81.01.pdf

[maj. tom]

https://www.google.com/maps/search/fina ... r+trinidad

[Fiddy]

Is the business registered as a Limited Liability?

[dogg]

Is the business registered as a Limited Liability?

yes it is

[Fiddy]

Is the business registered as a Limited Liability?

yes it is

Great, then the company's financial obligations are separate from you as the Director.

[Infamouz]

Is the business registered as a Limited Liability?

yes it is

Great, then the company's financial obligations are separate from you as the Director.

basic P.O.B<...

[dogg]

Is the business registered as a Limited Liability?

yes it is

Great, then the company's financial obligations are separate from you as the Director.

Thanks!!

another question- If the guy has no way of paying off the company debts what are his options? He doesn't even have a job now.

[Kenjo]

Is the business registered as a Limited Liability?

yes it is

Great, then the company's financial obligations are separate from you as the Director.

basic P.O.B<...

Principles of business is a mandatory subject

[powered by ?]

I advise you get legal advice, just last week I had this same discussion with my attorney, he indicated that of recent times the banks are ensuring that the directors are liable for the affairs of the company.. His Chambers was responsible for the drafting the agreements which the banks are using to hold the directors responsible..

[16 cycles]

Principles of business is a mandatory subject

even if so....sadly academic principles and moral principles differ when it comes to money.....

[src1983]

Is the business registered as a Limited Liability?

yes it is

Great, then the company's financial obligations are separate from you as the Director.

Thanks!!

another question- If the guy has no way of paying off the company debts what are his options? He doesn't even have a job now.

Why wasn't the VAT an quarterly taxes paid?

[pugboy]

Not to mention banks will have your name as a less creditable person

[Kenjo]

Not to mention banks will have your name as a less creditable person

Ah so that’s the catch which makes a big difference then

[dogg]

Is the business registered as a Limited Liability?

yes it is

Great, then the company's financial obligations are separate from you as the Director.

Thanks!!

another question- If the guy has no way of paying off the company debts what are his options? He doesn't even have a job now.

Why wasn't the VAT an quarterly taxes paid?

I really don't know. I wasn't associated in any way with the runnings of the company

[RGF Asset Management]

I advise you get legal advice, just last week I had this same discussion with my attorney, he indicated that of recent times the banks are ensuring that the directors are liable for the affairs of the company.. His Chambers was responsible for the drafting the agreements which the banks are using to hold the directors responsible..

I do not believe it would be as simple as that. A Limited Liability co in law is recognised as a distinct and seperate entity from its directors/shareholders. As such, its liabilities would always be seperate and apart from those the directors/shareholders.

Having said that, in an attempt to safeguard their interest, the banks may threaten said directors/shareholders that because of their affiliation with defaulting companies, they may be flagged as bad debtors for future personal credit considerations. But i do not think that an action in court against directors/shareholders personally for debts incurred by an LLC would be successful.

OP, you would still do well to discuss this matter with an attorney.

[De Dragon]

Basically, if you exhibited extreme breach of your fiduciary duty, you can be held liable for the debt of a company that is not an LLC. If your buddy doesn't have the money, creditors can come after his assets.

[mitch1980]

Minimum directors two; liability limited to ownership stake; restriction on share transfer; shares not public; complex record keeping.

speak to a legal rep/lawyer.
from Hamel Smith FIrm

http://trinidadlaw.com/choice-of-business-structure/

[pugboy]

I think the law was changed sometime in 1990s
Directors can be held liable, not 100% sure but heard talk of it.

[shogun]

Poor OP. His pressure fluctuating in here. Get some legal advice, OP

Not to mention banks will have your name as a less creditable person

[88sins]

Basically, if you exhibited extreme breach of your fiduciary duty, you can be held liable for the debt of a company that is not an LLC. If your buddy doesn't have the money, creditors can come after his assets.

Now I could be wrong eh, but iirc there was a legal precedent set for this a few years ago somewhere, can't recall the specific parties involved tho but iirc the directors in that case were actually held liable for the company's debt. iirc certain specific criteria need to be met for this to apply, one being that the entity trying to collect must be able to prove the intentional breach of fiduciary responsibility. An example of this would be if they can prove without doubt that the company was in fact solvent immediately prior to dissolution and was able to satisfy the debt prior to the company's closure yet the the executive management opted to not settle the debt and not pay off creditors, choosing instead to utilize the company's money to benefit the company's directors with gratuities or whatever instead. Basically, if a company, whether LLC or sole trader, is closing its doors, it's obligated to pay of its creditors as a matter of priority, the only accepted reason for not doing so being insolvency and inability to satisfy the debt for some time prior to its collapse. the problem creditors usually encounter is proving that is actually the case.


I go look for the precedent. but in the meanwhile, op, yuh friend better go see an attorney versed in corporate law

[RGF Asset Management]

Basically, if you exhibited extreme breach of your fiduciary duty, you can be held liable for the debt of a company that is not an LLC. If your buddy doesn't have the money, creditors can come after his assets.

I could be wrong but from my understanding of the law, this is only true if the director or shareholder is found to be in fraudulent breach of his/her fiduciary responsibility. In this case he/she may be held personally liable for any liability arising out of said breach.

If however the LLC goes into debt because of economic downturn or poor (not illegal) management decisions, its creditors could only levy on the assets of the LLC or the shareholders' equity in the LLC and not any personal holdings of the individual directors or shareholders. Hence the term 'Limited Liability Co.'

Again this is subject to correction but i would have discussed this topic ad nauseam when I incorporated back in 2005.

[hydroep]

Some years ago a friend asked me to be a director in his company, just for registration reasons. Not knowing any better i agreed to it. Now the company is in debt and owing VAT and income taxes.

Am I personally liable for any of the company's debts? What should I do? I never made any money from the venture nor did i participate in its running. Any advice will be welcome

Under normal circumstances no. The company is considered a separate entity in the eyes of the law and is liable for its own debts. Normally creditors are ranked and paid using the remaining assets. If those aren't sufficient to cover the debts then some gonna lose-out.

However, if the directors were using the company's assets like their own personal property (car, money etc) THEN they can be held liable as for all intents and purposes there is no distinction between the entities. IIRC the correct terminology is "piercing the corporate veil"...

[pugboy]

http://trinidadlaw.com/company-law-directors/

[src1983]

Basically, if you exhibited extreme breach of your fiduciary duty, you can be held liable for the debt of a company that is not an LLC. If your buddy doesn't have the money, creditors can come after his assets.

I could be wrong but from my understanding of the law, this is only true if the director or shareholder is found to be in fraudulent breach of his/her fiduciary responsibility. In this case he/she may be held personally liable for any liability arising out of said breach.

If however the LLC goes into debt because of economic downturn or poor (not illegal) management decisions, its creditors could only levy on the assets of the LLC or the shareholders' equity in the LLC and not any personal holdings of the individual directors or shareholders. Hence the term 'Limited Liability Co.'

Again this is subject to correction but i would have discussed this topic ad nauseam when I incorporated back in 2005.

The man said initially that no taxes were paid, this by itself should raise a flag. Another check would be to ensure not commingling of funds (eg using company money for personal gain)

[Dizzy28]

Successive governments have tried to go after directors of state companies. The outcome of any of those trials might be the real test of liabilities.

[dso]

So in a similar situation with OP as I applied for a credit card. Although I have no personal debts, I am apparently caution listed by the bank due to the company i was a director in. They are nowhere reviewing the application even though I left the organisation a year ago.

A cautionary tale for others, in my case the debt was managable and the CEO paying it bit by bit...

Life lesson learned i guess...Will be getting legal advice as well...

[88sins]

short story shorter
unless you are in a position where you can actually observe and implement action in the particular company, such as implementation of policies, ensure payments are being made, etc., don't accept the responsibilities of being listed as a director for anybody's business but your own.

it very hard to answer questions and take on culpability for another person's cl_sterf_ck that you had nothing to do with and zero say when it happened.

[De Dragon]

Successive governments have tried to go after directors of state companies. The outcome of any of those trials might be the real test of liabilities.

Yes, but not everyone has an AG and a PM as a friend and crony as did Malcolm Jones, Monteil, Duprey, Sackal etc.