Small Claim -Director Liability ?

[tali1]

If i issue small claim for breach of contract against a company (ltd)-are the director(s) automatically liable for the monies owed ?

[Buenchico]

Any such claim must be addressed to 'The Company Secretary' and not to any specific employee or director.

The whole point of a business acquiring limited company status is that it divorces the finances of the owners/directors from those of the company. While (in the event of a County Court Judgement being issued against the company) the directors have a duty to ensure that the Judgement is complied with (by a payment from the company's funds), there is no personal liability placed upon the directors. If, for example, the company is placed into liquidation through insolvency, creditors will only get a share of the company's assets (which could be anywhere between 0% and 100% of what they're owed, depending upon what assets are available for distribution) with no liability for payment being occurred by any director, shareholder or employee.

[Peter Pedant]

tait - automatically not I am afraid. it is the 'rule in Foss v Harbottle'

so you should issue you it as above as BC says to the ltd liability co
at the registered address.

cross your fingers and hope they dont defend in which case you can get judgement against the company in 14d.

Recent cases where there has been dishonesty in the company and so the directors become liable are not really helpful to you.

good luck

[tali1]

Thanks -"the directors have a duty to ensure that the Judgement is complied with (by a payment from the company's funds)," - so what happens if they fail on this duty -is there any sanction against them ? or is it simply enforcement on the Plaintiff's part ?

[Skyline D]

Pedantic quibble with Buenchico's as usual excellent answer. I think the claim should be addressed to "The Directors" of Whatever Company Limited, not the Company Secretary. All companies have at least one director. There is no longer a requirement for them to have a Company Secretary so writing to one is inadvisable. Even if the company does have one you would be better to write directly to the Directors I believe.

As for the follow up, if you do not believe the company has held up its end of a contract then it is your recourse to take legal action against them and have the case judged on its merits. Clearly they cannot be forced to do anything at all by the other party without legal action.

[FredPuli43]

True, Skyline. Write to the directors at the company's registered office, which may be that of some accountants' firm whose address is used for the purpose, and not an address from which the company trades, but that doesn't matter. It is still the only official address of the company and appears on their correspondence.

A company is a separate legal personality from its shareholders, directors, and employees. Therefore a breach of contract by the company can only result in an action against the company, and only if the company has enough to pay the damages will the claimant get them all. Directors sometimes volunteer to pay the company's debts, but they then list whatever they pay as a loan by the directors to the company and hope to get it back from the company in due course. They may do this simply to stop the company being forced into liquidation, because they think, given time, it will prosper. They can't be forced to do so. And sometimes directors are obliged by a bank, that lends money to it, to personally guarantee the loan to the company so, if the company defaults, the bank can claim the money from the directors. Otherwise the directors are not liable in the ordinary course of trade.

[FredPuli43]

PS. Foss v Harbottle. Good to hear those names again ! Well done Peter for bringing back memories of student days. It was decided in about 1840. You weren't around then were you ? I knew a judge who was so old that he'd had to pass an exam on the law before the Law of Property Act 1925, but given the option of answering on this new fangled law that was coming in soon!

[tonywiltshire]

As has been said a company is a separate legal entity which can own property and can have debts and as a general rule shareholders and directors are not responsible for those debts, by taking action against a company, you are not taking action against the Directors of that company.

The names Foss and Harbottle always struck me as being truly Dickensian, I think Foss v Harbottle was in 1843, the year of A Christmas Carol. Not sure if PP was around then people in Eastern Manchester may live long lives but 170 may be stretching it a little.

[tali1]

A caveat according to The Guardian
"Be careful if the address is a company's "registered office" – there may be nothing there."

[FredPuli43]

True, tali 1, but that is only important if you think bailiffs are going to go there and find nothing belonging to the company, to enforce a debt. You may, out of abundant caution, in the hope that the directors will see it more readily, send correspondence to both the company's last known place of business and the registered office, but the registered office is the legal address of it, and the company is a) obliged by law to have one and b)notify the Registrar of Companies if it changes it. Those are obligations for which directors are responsible.

[tali1]

Thanks the registered office is one of those tower blocks accountants offices were multiple companies are listed.So afaik there would be no company officials there

[Buenchico]

The registered office of a company is simply an address where, by law, official documents can be served upon a company. Many highly-respected companies (often employing tens of thousands of staff) have their registered office at an address which is no more than one man (who doesn't work directly for the company) ensuring that documents are forwarded to the correct people (and who does so for hundreds of different companies).

Irrespective of whether the registered office is simply such a forwarding facility or the actual head office of the company, the law still requires that demands for payment MUST be sent to the registered office. (Of course a company can accept, and deal with, demands that are sent elsewhere but if they fail to do so the claimant won't have a valid claim in court because they've failed to deliver their demand to the correct address).

You should ALWAYS send a demand for payment to the registered address of a company. Of course you're free to copy that demand to other offices of the company but it's the one to the registered address which will count in court.

[FredPuli43]

tali, there almost never are directors of the company at its registered office. The registered office is where the official and legal documents of the company are dealt with, commonly the firm's accountants who will get all tax demands inevitably sent there, it being the registered office. A farm here has a registered office a hundred miles away, in an office complex, because that's where all its books are done. I be surprised if the directors have visited it more than once!

[tali1]

Update on this
Defendant has offered to pay my original amount + court costs.However HCEO tell me he is not liable for the interest- as interest only applies on enforcement .I asked small claims helpline repeatedly and they were unable to answer just saying "that's between you and him"
Can anyone clarify?