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Are Shareholders Liable For Any Of The Company Debt?

The quick answer

The answer is usually no. That is the whole point of a company being limited. On insolvency, only the company assets can be claimed to pay the creditors unless the shareholders have given personal guarantees.

If the company was formed as a company limited by guarantee (these are usually clubs, societies or charity companies) then the shareholders may be liable but usually for a fixed sum perhaps of only £5 each. 

In more detail

Sometimes the shareholders are also the same people as the directors. It is more common for directors to be asked to give personal guarantees (“PG’s”) for bank loans or finance agreements especially with a limited company less than three years old.

You should know if you have given a personal guarantee (“PG’s”) although in some construction insolvencies material suppliers try and make directors give PG’s in the initial terms and conditions of supply. Always be careful with what you sign.

Shareholders could also be liable to repay funds if they have been paid illegal dividends – that is dividends not out of profits.

tip

If you need insolvency advice the earlier you talk to someone like us the better as you will have more options. We can help, contact us today.

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David Kirk

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David Kirk ACA FABRP

We have just worked with Kirks to complete the closure of our company. Everything went smoothly and professionally. I would recommend this firm and the staff who were very very helpful and quickly finalised everything. Thank you Kirks.
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David Kirk

Licensed Insolvency Practitioner