If I Resign As A Company Director, Am I Still Responsible for the Company and its Debts?

30 May 2024

Fighting to pull a company back from the brink of financial ruin can take a heavy toll on any director. It can be tempting to walk away and leave the recovery efforts to someone else. But be warned, just because you cut ties with the company doesn’t mean you are no longer responsible for it.  As a former director, you will typically continue to be responsible for your actions while in office and can still be pursued by the acting Insolvency Practitioner for a variety of claims.

That’s because liability is based on more than just your title or status with the company. It’s affected by your actions, and inactions, while you served as well. Here are some conditions you’ll want to be on lookout for. Understanding your responsibilities better could save you from a nasty surprise, months or even years down the line.


Any personal guarantees you’ve signed for company loans or credit cards remain legally binding whether you stay with the company or not. That means you are obligated to repay these debts if the company cannot. Such agreements are almost impossible to get out of, even if you signed unwillingly or without being aware of the implications. To protect yourself, when you resign as director and sell your shares make sure the remaining directors or shareholders legally take over any personal guarantees to the satisfaction of the lenders and creditors.


Often, when a director decides to leave a business the remaining directors will agree to write-off a debit (overdrawn) loan account as part of the settlement agreement. Unfortunately, if the company enters into an insolvency process shortly afterwards the incoming Insolvency Practitioner is within their rights to disagree with this decision, and they may start recovery action for the written off balance.


Any legal commitments you made while serving as director could remain in effect after your resignation. Check your shareholders agreement and other legal documents to see if they stipulate directors are required to provide security or are personally liable for company debts.


When a company fails, an Insolvency Practitioner will investigate the causes. Your conduct could be put under the microscope to see if you played any part in the company’s losses, and if you did, you may be held liable for them. You are at risk if:

You continued trading after the company was insolvent.

As a director, you have a duty to your creditors. If you allow the company to continue trading and creditors are left worse off as a result, then you may be found guilty of wrongful trading.

This also applies if the court judges you ought to have known there was no reasonable prospect of the company avoiding insolvency, even if you didn’t. Your skills, knowledge and experience will be taken into consideration to determine if you misused the company’s assets, and they could demand you repay any losses made during the period of wrongful trading.

You were in breach of director duties.

If you have failed to act in the best interests of the company, and its creditors, you can be held liable for its debts. This could include exercising all reasonable care and skill in your duties and keeping accurate and up-to-date records of the company’s financial position, as well as misfeasance or misrepresentation.

Acts of misfeasance include issuing dividends when the company is insolvent, making unauthorised payments to yourself, or using company assets for your personal benefit. Misrepresentations are instances when you have made false statements about the company’s financial situation to banks, suppliers, or other creditors.

Making preferential payments to one creditor over another in the lead-up to an insolvency is also a breach of your duty as director, as are transactions under value. By selling an asset for less than its market value you are causing the company to lose assets that could have been used to pay your creditors, and you can be held liable for this even if your intention was to raise urgently needed funds for the business.

You engaged in fraudulent trading.

If you have knowingly engaged in trading activities with the intention of defrauding your creditors you can be held personally liable for any losses incurred as a result. You could also face prosecution. Fraudulent acts could include borrowing money or accepting lines of credit which you know the company cannot repay, placing orders for supplies the company cannot afford, or accepting orders which you are aware the company cannot fulfil.

You can also be held liable if others in the company were acting fraudulently, and you knew and failed to take the appropriate measures to prevent or put a stop to it. As director, you bear a degree of responsibility for any fraudulent or deceptive activities that happen under your watch.


Resigning as a company director is not a fix-all solution to escaping personal liabilities and responsibilities. While you are within your rights to leave your directorship if you want to, doing so solely because of the company’s mounting debts could create legal problems for you, and it will not necessarily free you of responsibility for them.

This is an important decision that may impact your financial future, so don’t try to face it alone. An insolvency practitioner can help you understand the implications of your choices and ensure you have fulfilled all the obligations expected of you. That way you can leave confident there will be no unexpected consequences waiting for you further down the line, especially if the company is financially distressed.