If a Pty Ltd Company goes into Bankruptcy, voluntary or imposed,

Dear Duesberg



Generally not. A company is a creature of "limited liability" and that means that Directors and Shareholders only suffer exposure to the failure of the business to the extent of their shareholdings in the failed company.



In a couple of situations, however, the corporate veil will be lifted and Directors may face personal liability for their conduct while running the company.



The main one is loans to directors or shareholders. They can be called upon by the liquidator according to the specific loan agreement. This is a big problem in smaller or family companies because often loans are extended from the company to related persons.



Other scenarios which will trigger personal liability include:


1) you have given a guarantee over your personal assets (your home) to finance the company (the guarantee will be called upon and you will lose your home);



(2) you trade when you know the company was insolvent, or cannot pay its debts when the fall due - this makes a director personally liable for losses and ASIC can apply for compensation; and



(3) you fail to cause the company to pay the appropriate tax (at the moment PAYG) and the ATO issues a Director Penalty Notice


I hope this helps. If so, please click 'accept'.