Personal liability

In an article ‘Hints for Hungry Litigators’ in the New Law Journal of 6 May, Simon Headley considered a company’s obligations and liabilities concerning its name and stationery, and the question of directors’ personal liability for a company’s acts. A particularly fruitful area for litigators is the various requirements under the Companies Act 1985 and the Business Names Act 1985 as to how a corporate name is to be used on certain documents. Companies often change their names, and when dealing with a business whose precise status and name is unclear from its paperwork, it is prudent to issue a formal request under the Business Names Act for the names and addresses of the partners. Section 349(1) of the Companies Act 1985 has the dramatic effect of making the signatory of any document not displaying the company’s full title, personally liable. If a company’s cheque just carries the trading name of the company, then the signatory is personally and fully liable on the cheque. This may occur when a company has only recently converted from a partnership or from sole trading. Similarly, if an order for goods does not mention the company’s full name, it may be something on which the signatory is personally liable. The article then considered in detail the circumstances in which a director of a company may or may not be personally liable, concluding that there is no simple answer as to when a director or shareholder might be jointly liable with a company, whether for fraud or deceit or for something less drastic. An article well worth reading and keeping to hand.