How Long Are Directors Liable After Leaving a Company?

Many directors assume that resigning draws a line under their exposure. It does not. Personal liability attaches to what you did while you were a director, so stepping down protects you from what happens next, not from what already happened on your watch. If you are thinking about leaving a company, or you have already left, this is what still follows you.

Resignation does not erase what you did in office

The routes to personal liability all look at your conduct as a director at the relevant time, not at whether you still hold the role when the claim is brought.

• Wrongful and fraudulent trading, and misfeasance are assessed by reference to how you acted while you were a director. A liquidator appointed after you leave can still examine decisions you took before you resigned.
• HMRC Personal Liability Notices and Joint and Several Liability Notices target the director whose fault or neglect caused the unpaid tax, whether or not that person is still on the board.
• An overdrawn director's loan account remains repayable. Leaving does not clear the balance.

Personal guarantees outlive your directorship

A personal guarantee is a contract between you and the creditor. It does not end because you resign as a director. Unless the guarantee is formally released by the creditor, it continues to bind you after you leave, which is why reviewing and, where possible, releasing guarantees should be part of any exit.

Time limits still apply

Claims against former directors are not open-ended. Time limits under UK company law and insolvency legislation govern how long after the relevant events a claim can be brought, and they vary with the type of claim. The important point is that the clock runs from what happened during your directorship, so resigning does not by itself put you beyond reach. We will confirm the specific periods that apply to your circumstances.

What to do next

If you are planning to step down, or you have concerns about decisions taken before you left, take advice on where you actually stand and how to limit what follows you. Bonsai Law advises current and former directors on personal liability and clean exits. Start the conversation. See also what directors can be personally liable for and how to protect yourself as a director.