When are directors personally liable for corporate debt?

A KEY reason that companies are the preferred form to conduct business is that the personal assets of its shareholders and directors are shielded from creditors in the event of a company's insolvency.

This is because the company is treated as a separate legal entity from its directors and shareholders, and it is this principle of limited liability that makes the corporate vehicle such an attractive one.

However, not many may be aware that there are circumstances in which directors can be held personally liable for the company's debts.

For instance, the law sometimes treats specific actions as being carried out by a company's controllers (which include its directors) and not the company, even where they are done in the …