Can a Company Director Be Personally Liable for a Company Debt?

A limited company is a separate legal entity from its directors. In most circumstances, this means that a company’s debts are the company’s responsibility – not the personal responsibility of its directors.

But limited liability is not absolute.

There are circumstances in which a director can become personally liable for money owed by a company. This may arise because the director has personally guaranteed the company’s obligations, because of certain conduct by the director, or because specific legal provisions apply.

Understanding when personal liability can arise is important for both directors and businesses seeking to recover commercial debts.

When can a director become personally liable?

Personal guarantees:

One of the most common circumstances is where a director has provided a personal guarantee.

A personal guarantee is an agreement under which the director agrees to meet the company’s obligations if the company fails to do so. These may be used for business loans, leases, finance agreements or trade credit. Whether a director is liable and to what extent will depend on the terms of the guarantee and the obligations it covers.

Wrongdoing or misconduct:

A director may also face personal liability because of their own conduct.

This can include circumstances involving:

These issues are particularly relevant when a company is experiencing financial difficulties or enters insolvency proceedings.

For example, under section 214 of the Insolvency Act 1986, a Court may order a director to contribute to a company’s assets where the statutory conditions for wrongful trading are met. This does not mean that a director automatically becomes personally liable simply because their company is unable to pay its debts. The circumstances and the director’s conduct are important.

Can you pursue a director for an unpaid company invoice?

Not simply because they are the director.

A creditor needs to establish a legal basis for pursuing the individual. This could include a personal guarantee or circumstances giving rise to personal liability through the director’s own conduct.

Before taking action, it is therefore important to establish:

A director negotiating an agreement or communicating with a creditor does not, by itself, make them personally responsible for the company’s debt.

What should a creditor do?

Where a limited company has failed to pay, the starting point is to establish who owes the debt and the legal basis of your claim.

If there is a potential personal guarantee or concern about the director’s conduct, the position should be assessed carefully before assuming that the director can be pursued personally as there a strict requirements that a personal guarantee must meet in order to be enforceable.

At Lovetts, we understand that commercial debt recovery often involves more than establishing that an invoice remains unpaid. Understanding the contractual and legal position can be critical to determining the appropriate recovery strategy.

If your business is owed money by a limited company and you are unsure who may be liable, our specialist debt recovery team can help you assess the position and advise on the appropriate next steps.

15 October 2026