Separating Personnel and Business Assets

[Lowery]

Have my own Ltd company.

I don't buy/sell product (i.e. I only sell my time) and I am the only Director/Employee.

I pay myself a salary and transfer regular dividands from my Business Bank Account to my Personal Bank Account.

Say the company is sued can my personal assets (i.e. personal bank accounts) come into the firing line?

What if I have personal overseas bank accounts?

At the moment I'm talking about money but in the future I will buying a house etc...

Also does liability extend to the company secretary as well?

[Ardesco]

If yout have a LTD company your liability should be limited unless you have signed waivers accepting responsibility for something.

That being said some of these things aren't worth the paper they are written on. For example Lloyds TSB have have the director sign a form stating that they are liable for the company accounts overdraft, however this has never been tested in court and will most likely fail if they tried due to the company being LTD, it works on the principle that most people will never try to go to court and fight it.

You will find a lot of things put in contracts from various people that are unenforcable but put in there anyway because most people don't know what is enforcable, and what is not.

This being said IANAL and I don't know your specific circumstances. I would also suggest joining PCG and getting some insurance to protect your co against getting sued.

[tim123]

That being said some of these things aren't worth the paper they are written on. For example Lloyds TSB have have the director sign a form stating that they are liable for the company accounts overdraft, however this has never been tested in court and will most likely fail if they tried due to the company being LTD, it works on the principle that most people will never try to go to court and fight it.

I think that you are wrong.

Directors guarantees have been held up in court as enforcable.

What might not be enforcable is something hidden in the small print, but sensible banks don't do that any more. If they need a guarantee from you, they will make sure that it is done properly, telling you to seek advice before signing.

And back to the original question. The Director will also be liable if he was "trading illegally". Or if he deliberately voids his company of money to avoid a Tax bill, he can be made personally liable for that.

tim

[Ardesco]

Well I know for a fact that the Lloyds TSB one is untested in court, and they also don't think it is likely to hold up thanks to a little bit of insider knowledge, most business account managers know this as well they just don't mention it (unsurprisingly).

I agree that some directors guarantee's will be held up in court, but some others won't. It all depends of the wording on the guarantee. Most people assume that everything will hold up in court when it is surprising how much does not due to an unenforcable clause. Best thing to do is get it checked by a reputible lawyer to see what they think if you are worried about it.

Yes the director can be held liable for funds if he is doing somthing illegal, but being sued implies that it is another company looking to recover losses because a project deadline was missed/contractor skipped out of the contract before he should. I would not classify being caught for doing something illegal as being sued.

[Lowery]

And back to the original question. The Director will also be liable if he was "trading illegally". Or if he deliberately voids his company of money to avoid a Tax bill, he can be made personally liable for that.

tim

So really unless I am acting illigally or have personally guaranteed something (as a Director) then my personal assets should remain safe.

I know that if my company went bust for the reasons of not being able to pay suppliers then the Director would not be personally liable. But I wondered whether this changes when being sued (e.g. through PI or walking out on a contract).

BTW I'm not going through this at the moment but I like to know these things...

What about the Company Secretary question?

[tim123]

First up 'illegal trading' is just a name. It encompasses things which you might not consider to be illegal in the normal sense.

But no, you cannot be personally sued for a commercial decision, for example, to pull out of a contract, only the company can be sued for this.

As to Professional Negligence, then it IS you who can be sued personally. You are the 'profesional', it's not the company. So you can't hide behind the company's Ltd Liability for this. (And before anyone says, yes I know it's unlikely to happen, and yes you can take careful step to mitigate it happening etc, etc. I'm just talking theoretically here).

tim

[Lowery]

As to Professional Negligence, then it IS you who can be sued personally. You are the 'profesional', it's not the company. So you can't hide behind the company's Ltd Liability for this. (And before anyone says, yes I know it's unlikely to happen, and yes you can take careful step to mitigate it happening etc, etc. I'm just talking theoretically here).
tim

If you commit Professional Negligence then is this where PI insurance kicks in? But of course this has limits on the amount insured.

How do you make sure your personal assets stay out of it....in NZ it is common for family homes etc... to be in a trust.

[tim123]

How do you make sure your personal assets stay out of it....in NZ it is common for family homes etc... to be in a trust.

They don't.

They are at risk along with everything else.

tim

[Lowery]

Interesting...I would have assumed that there would have been some method/structure of seperating business assets and personal assets.

If from what your saying is true Tim I wonder how many contractors out there actually realise (or have even thought about) that if they are sued they could lose the lot. Even the assets not at all associated with the ltd company.

[boredsenseless]

They don't.

They are at risk along with everything else.

tim

Actually it depends on the contract, if it is a pure B2B contract and you are not named in the contract then it is the company that is sued not you. You will however be liable if you did not comply with the terms of required indemnity cover in your contract though.