Can a CEO Be Held Personally Liable? UK Law Explained

"CEO" is a job title, not a legal category in UK company law. The personal responsibilities attach to the role of director, and a chief executive is almost always a director, usually the one making the biggest calls. So the real question is not whether a CEO can be personally liable, but when the decisions you take can reach past the company and onto you.

The starting point protects you

When you incorporate, the company is a separate legal person. It owns its contracts and its debts, and creditors pursue the company, not the people running it. That principle comes from Salomon v Salomon & Co Ltd [1897] AC 22 and is the reason most decisions a chief executive takes carry no personal exposure at all.

Where a decision-maker becomes personally exposed

The protection lifts in specific circumstances, and they tend to involve exactly the kind of decisions a CEO makes.

• Trading on too long. Wrongful trading under s214 of the Insolvency Act 1986 applies where you let the company keep incurring liabilities when you knew, or ought reasonably to have known, that there was no reasonable prospect of avoiding insolvent liquidation. It does not require dishonesty; optimism is not a defence.
• Dishonest trading. Fraudulent trading (s213 IA 1986 and s993 Companies Act 2006) requires intent to defraud creditors and carries criminal as well as civil consequences.
• Misapplying company money. Misfeasance under s212 IA 1986 covers using company assets for the wrong purposes or entering transactions that benefit you at the company's expense.

The higher your role and expertise, the higher the standard the court applies. Wrongful trading is judged partly by objective standards and partly by the specific knowledge and experience your role requires, so a finance-literate chief executive is held to more, not less.

What to do next

If your company is under financial pressure and you are the person deciding whether to carry on, that is the moment to take advice, not after liquidation. Bonsai Law advises directors and chief executives on personal liability and directors' duties. Start the conversation. It is also worth reading what directors can be personally liable for and how to protect yourself as a director.