You personally
Will I be personally liable for company debts?
Short answer
Usually not. A limited company is a separate legal person, so its debts are its own. You become personally exposed mainly through personal guarantees, an overdrawn director's loan account, unpaid share capital, certain HMRC notices, or a finding of wrongful or fraudulent trading. Each of those can be identified and planned for in advance.
The starting point: limited liability
The company contracts in its own name. If it cannot pay, the creditor's claim is against the company, not against you. That is the whole point of a limited company, and it holds in most cases.
Where does personal liability actually come from?
| Route | What it is |
|---|---|
| Personal guarantee | A separate contract in which you promised to pay if the company did not. It survives liquidation. |
| Overdrawn director's loan account | Money you owe the company. A liquidator can pursue it as an asset. |
| Unpaid share capital | Shares issued but not paid for remain payable. |
| Wrongful trading | Continuing to trade when you knew, or should have known, there was no reasonable prospect of avoiding insolvent liquidation. |
| Fraudulent trading | Carrying on business with intent to defraud creditors. Rare, and serious. |
| HMRC notices | Personal liability notices and joint and several liability notices in defined circumstances. |
| Misfeasance | Breach of duty causing loss to the company, for example selling assets at an undervalue. |
How do I find out what I have guaranteed?
- Check bank facilities, overdrafts, invoice finance and asset finance documents.
- Check the lease, and any licence to occupy.
- Check supplier credit application forms, where guarantees often sit in the small print.
- Check any landlord or franchisor deed you signed as an individual.
- Gather them all before you decide anything about the company.
What reduces the risk?
Acting early, taking advice and following it, keeping proper records of the decisions you took and why, not favouring one creditor over others, and not taking money out of an insolvent company.
Delay is what tends to be criticised, not failure. Companies fail. What is looked at is what the directors did once it became clear the company could not pay.
Reviewed by Michael O'Connor, M.A. (Cantab), MABRP
Director and lead adviser. Last reviewed 2026-09-25.
Common questions
Does liquidation cancel a personal guarantee?
No. A guarantee is a separate contract between you and the creditor, so it continues after the company closes.
Am I liable for unpaid VAT and PAYE?
Not usually, because they are company debts. HMRC can issue personal liability notices in defined circumstances, so treat anything addressed to you personally as urgent.
What exactly is wrongful trading?
Continuing to trade when you knew, or ought to have concluded, that there was no reasonable prospect of avoiding insolvent liquidation. Taking and following advice is directly relevant to that question.
Could I lose my house?
Only through a personal obligation such as a guarantee secured on it, not because the company failed. That is precisely why the guarantees need to be identified first.
Talk it through before you decide anything.
Free, confidential and informal. Michael replies personally, usually the same day.
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This page is general information, not legal or financial advice.