Personal liability of company directors

The conventional view of the liability of a limited company is that any corporate losses will not exceed the amount invested in it, i.e. as represented but limited to the value of its shares. In other words, shareholders’ personal assets are not at risk if the company fails. The company is a separate legal entity so it carries its own losses.

However, company directors (who are often also shareholders) owe a duty of care to the company, its shareholders, employees and creditors. As a result, a director can become liable for his or her own PAYE and NI payments, for income tax due on any cash taken from the company, any personal guarantees and/or indemnities provided to company creditors, and any liabilities resulting from wrongful trading (trading when the company was insolvent and had no prospect of avoiding liquidation), misfeasance (e.g. acquiring a company asset for less than it was worth) and fraudulent trading (e.g. fraudulently obtaining credit in the company’s name).

In last November’s newsletter I reported a case in which company directors were held to be liable for a £2m award in a whistleblowing case. This is because in such cases, as with discrimination claims, individuals can be named as co-respondents along with the limited company.

We now have another example of how directors can be held liable in respect of the actions of a company in the High Court case of Antuzis & others v DJ Houghton Catching Services & others.

Can a long-term sickness employee become practically unsackable?

The Employment Appeal Tribunal (EAT) have recently held an employee to hold ‘an implied right not to be dismissed’ when on long-term sick leave.

Naturally, this has caused many employees great concern
because long-term sickness absence, in itself, is usually fair reason to
consider dismissal.  Whilst there can be
various factors at play, including any potential disability of the employee,
the principle of an individual having to be present at work to fulfil their job
role (and employment) remains.

So what happened in the recent case of ICTS (UK) Limited v Mr A Visram to cause such concern?

Well, let’s set the scene briefly, Mr Visram was
contractually entitled to sickness benefit payments (termed ‘Long Term
Disability Benefits’) during any period of continuous sickness absence from
employment whilst he remained an employee. 
But, for various reasons, the insurer and employer didn’t wish to pay
them and, in doing so, Mr Visram was dismissed on grounds of sickness absence
and so ended his entitlement to contractual Long Term Disability Benefits payments
by the insurer (as the policy required his continued employment).