Liabilities of directors

The directors’ criminal liability could also be incurred in several matters related to operation of the company and its day-to-day management and activities (e.g. in case of breach of labour laws, tax laws, commercial laws, customs laws, foreign exchange control regulations, bribery/anti-corruption laws etc.).

Directors can face personal liability under a range of statutes.  Some statutory regimes (such as workplace health and safety laws) apply at State and Territory level and so may not be uniform around Australia, which can heighten the risks for directors of companies operating in more than one State or Territory.

Personal liability for directors may, in certain circumstances, arise under Austrian legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption.  In certain cases, criminal liability may arise.

A director may also be disqualified by the court from acting as a director upon request of the majority of shareholders. Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for all (and not only individual) directors.

If a director fails to act when other directors have acted in bad faith then by virtue of their inaction a director may also be found to be complicit in such acts.

There are a number of specific liabilities to take into account as a director, such as:

• Liability for the incorrect application of the liquidity test in a private limited liability company. If it is established that the directors knew, or ought to have known, given the circumstances, that the company would no longer be able to pay its debts over a period of at least 12 months as of the date of distribution of the dividend, then they are jointly liable vis-à-vis the company and third parties for all damages that follow from it.
• Liability for not complying with the conflict of interest procedure (see Transactions with the company).
• Liability for not complying with the alarm bell procedure (see What are the key general duties of directors?). If the general shareholders’ meeting has not been convened, then any third party damages will be considered to follow from the lack of convocation.
• Tax liabilities. A joint liability of directors applies in case of the non-payment of professional withholding tax and VAT, and, in case of the bankruptcy of the company, for the outstanding social security contributions (which is frequently called upon in an insolvency context).
• Tort liability. Third parties can bring a claim against a director for damages resulting from a tort committed by such director. Typical cases involve creditors, employees, etc (e.g. failure to enter into an insurance, false appearance of solvability and proceeding with a manifest deficit activity). Limitations however apply on the combination of claims under contract and other tort.
• In certain cases, criminal liability may arise (e.g. non-compliance with legal obligations relating to the annual accounts, forgery, misappropriation of company funds and goods, money laundering, etc.).

A director may also be disqualified by the court from acting as a director if they being a director of a company were wholly or substantially responsible for the company:

• Being wound up because of its inability to pay its debts as and when they become due.
• Ceasing to carry on business because of its inability to pay its debts as and when they become due.
• Entering into a scheme of compromise or arrangement with its creditors.
• Failure by the director to fulfil their constitutional and statutory duties.

Disloyal administration

Directors of public and closed corporations may be subject to criminal liability for a crime called "disloyal administration" (administración desleal) which was incorporated into the Chilean Criminal Code in 2018.

If a director, in their role as administrator/manager of the company’s patrimony assets, causes damage to the company, either by abusively exercising their powers to dispose on behalf of the company or to bind it, and/or by executing or omitting any other action in a manner manifestly contrary to the corporate interest of the company, they shall be subject to imprisonment and fines ranging from 5 to 30 Unidades Tributarias Mensuales (UTM) (approx. USD370 to USD 2,200), in addition to a fine of 50% to 100% of the damage caused.

The Chilean Criminal Code provides higher sanctions in the event the disloyal administration crime is committed by a director of a listed corporation.

Economic Crimes Law

On August 17, 2023, Law No. 21,595 on Economic Crimes (Ley de Delitos Económicos) was published in the Official Gazette. It systematizes economic crimes and crimes against the environment and, among other provisions, extends the criminal liability of legal entities (personas jurídicas).

This Law establishes a different crime determination statute for the so-called "white collar crimes", increasing penalties and expanding the catalogue of crimes attributable to companies and their officers.

Also, senior management of corporations (including directors) will face more severe liability, meaning that compliance models (modelos de prevención) will have to be strictly observed by them in order to avoid reputational and economic damage.

The new concept of "Economic Crimes" (Delitos Económicos), contemplates new criminal types which are linked, in general terms, to crimes of socioeconomic and environmental connotation.

Further, directors must not prevent or obstruct investigations which aim to establish their own responsibility, or the responsibility of any managers, executives etc.

Although the company will be liable for any breach, a director is also personally liable for ensuring the company complies with all of the following requirements:

• Ensuring that there is no violation of contractual obligations.  Such violation constitutes an objective liability, i.e. no negligent or intentional conduct is required.  All obligations resulting from the Business Corporations Act have to be met.
• Ensuring that the company pays its taxes and advances in time and submits the respective tax declarations.
• Ensuring that the company makes payments in time, especially those regarding the company's employees' social security insurance, health insurance and contribution to the State Employment Policy.
• A director might be found personally liable for crimes defined by the Penal Code, especially economic crimes committed by them during the performance of their duties.
• Ensuring that all administrative law requirements are met fully and in a timely manner, especially those concerning business licences or other titles for executing business and environmental law requirements etc.
• Ensuring that the requirements of the Labour Code and any secondary legislation regarding employees' conditions are met.
• Ensuring that the company meets all the liability requirements specified in the Civil Code as "special liability" cases.

A director may under certain circumstances be disqualified to participate in the management of a company by the bankruptcy court and thus will not be able to participate in the management of a company without assuming personal and unlimited liability. Further, in certain cases criminal liability may arise for directors.

Personal liability for directors may, in certain circumstances, arise under Finnish legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption.  In certain cases, criminal liability may arise.

A director may also be disqualified by the court from acting as a director or from taking part in the formation or management of a company or from acquiring controlling interest in an operating company.  A disqualification order can be made for conviction for criminal offences relating to the running of a company or persistent breaches of statutory obligations.

Failure to comply with certain company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

• A director may be held personally liable for taxes and relating penalties due by the company if the director has breached tax obligations of the company.
• Directors can be held criminally liable when:
  • They have committed a crime or participated in the commission of a crime.
  • They have committed a criminal offence within the company related to its activity, even if they did not participate directly in the commission of this offence (e.g. under employment law, tax law, environmental law, health and safety regulations, etc.).
• Failure to comply with a company’s obligation to file a declaration of beneficial owner (bénéficiaire effectif) with the Trade and Companies Registry may lead to liability for the corporate officer, the consequences of which are imprisonment and a fine, as well as additional penalties (such as being prohibited from acting as manager).

In case of non-compliance with the filing of financial statements, the managing directors of a GmbH are subject to administrative fines.

A director who contravenes provisions of certain legislation may be held to have committed an offence and liable on summary conviction to a fine or a term of imprisonment or both, for example:

• making an affidavit of solvency without reasonable grounds and
• disposing of company assets without court approval and outside the normal course of business after the passage of a resolution for official liquidation.        

In addition, the director may also be personally liable for any money lost by the company or any person, for example where a director wilfully conceals the name of a creditor entitled to oppose the confirmation of a resolution to wind-up the company, or wilfully misrepresents the nature or amount of the claim of a creditor, or aids, abets or is privy to a concealment or misrepresentation. In these circumstances, the director is personally liable to pay the amount of the creditor’s claim to the extent it is unpaid by the company.

A director of a company (or associated company) in liquidation within the previous two years is not eligible to serve as an administrator of the company in administration.

See also Liabilities on insolvency.

Personal liability for directors may, in certain circumstances, arise under Hong Kong legislation including that relating to, employment, consumer protection and bribery/anti-corruption. In certain cases, criminal liability may arise.

A director may also be disqualified by the court from acting as a director or from taking part in the promotion, formation or management of a company. A disqualification order can be made for a variety of reasons (eg conviction for criminal offences relating to the running of a company, persistent breaches of statutory obligations such as filing documents with the companies register).

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

The Bankruptcy Act imposes several obligations on the directors of companies under insolvent liquidation or bankruptcy procedures (aiming at the orderly and transparent management of such distress situations, particularly the handover of the management and documentation of the insolvent company to the liquidator). Failure to observe these obligations may give rise to penalties imposed personally on the directors.

The direct, personal exposure of the directors to fines or liability may also arise in several other specific cases under applicable laws, including tax and environmental laws. For example, sectorial environment legislations (Section 102(5) of Act LIII of 1995 on the protection of the environment) sets out that directors who have supported a resolution (measure), in respect of which they knew, or should have known given reasonable care that such resolution (measure), if carried out, will cause environmental damage, shall bear unlimited and joint and several liability in the event of the termination of the business association or sole proprietorship for the company’s ensuing liability for remediation and compensation for damages, which the company did not satisfy.

Criminal liability of the directors may also be relevant in extreme cases (embezzlement, fraud, serious breach of financial reporting obligations etc.). 

See Breach of general duties and Liabilities on insolvency.

Personal liability for directors may, in certain circumstances, arise under Irish legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption.  In certain cases, criminal liability may arise.

A director may also be restricted or disqualified by the court from acting as a director or from taking part in the promotion, formation or management of a company.  A disqualification order can be made for a variety of reasons (e.g. conviction for criminal offences relating to the running of a company, persistent breaches of statutory obligations such as filing documents with the companies register, being found liable for fraudulent or wrongful trading and generally for conduct which makes a director unfit to manage a company).

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

Personal liability for directors may, in certain circumstances, arise under Côte d’Ivoire legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption. In certain cases, criminal liability may arise.

A director may also be disqualified by the court from acting as a director or from taking part in the promotion, formation or management of a company. A disqualification order can be made for a variety of reasons (e.g. conviction for criminal offences relating to the running of a company, persistent breaches of statutory obligations such as filing documents with the companies register, being found liable for fraudulent or wrongful trading and generally for conduct which makes a director unfit to manage a company).

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

Personal liability for directors may, in certain circumstances, arise under Italian legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption. In certain cases, criminal liability may arise.

Company administration obligations

Under general legislation in Japan, if the company fails to comply with regulatory obligations, it is possible that the (representative) director is also subject to punishment, administrative fine, etc together with the company. 

Criminal liabilities - misappropriation

If a director, through their own action or that of a third party, deliberately causes damage to the company, breaches their fiduciary duty and causes a financial loss to the company, such director can be punished by up to 10 years' imprisonment or a penal fine of not more than JPY10 million, or both.

Director liability is personal and unlimited generally. Some statutes such as those relating to environmental and health and safety, employment, consumer protection, tax and bribery/anti-corruption have express liability provisions for directors.

Most statutes provide that where a body corporate is found to have committed a criminal offence, every director is personally liable for such offence unless they can prove that they were not aware or could not have been aware that the offence was being committed.

A director may also be disqualified by the court from acting as a director or from taking part in the promotion, formation or management of a company.

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

Managers may be subject to all the provisions of the Luxembourg Criminal Code concerning misdemeanours or felonies. Those most relevant for managers include fraud and embezzlement. The LSC qualifies in particular as criminal offences the failure by managers to fulfil some of their specific duties, such as:

Failure to:

• Submit the annual accounts and the management report (and the auditor's report and the consolidated accounts, if applicable) to the general meeting of the shareholders within six months after the closing of the relevant financial year and
• File them with the RCS for publication.
• Convene, the annual ordinary general meeting within three weeks of being requested to do so.
• Publish changes in the shareholdings of the company.
• The opening of a public subscription for shares or bonds.

A failure to comply with duties of directors to act in good faith and in best interests of company engages the director's criminal liability and can lead to a fine not exceeding MUR100,000 and to imprisonment for a term not exceeding 12 months.

A director may also be disqualified by the court from acting as a director for a period not exceeding five years (as may be specified in the order of the Court) where:

• A person has been convicted of an offence in connection with the promotion, formation, or management of a company, or has been convicted of a crime involving dishonesty punishable on conviction with a term of imprisonment exceeding three months.
• A person has committed an offence under certain provisions of the Companies Act.
• A person has, while a director of a company:
  • persistently failed to comply with companies legislation or, where the company has failed to so comply, persistently failed to take all reasonable steps to ensure such compliance
  • been convicted in relation to the performance of their duties as director
  • caused prejudice to the company resulting in a successful claim by a shareholder.
• Within the period of seven years before the making of the application, a person to whom the application relates, was a director of two or more companies and in relation to each of those companies, that person was wholly or substantially responsible for the company:
  • being wound up
  • ceasing to carry on business because of its inability to pay its debts as and when they become due
  • having a receiver or manager of its property appointed, or
  • entering into a scheme of compromise or arrangement with its creditors.

Another potential risk is that the director has an interest in a transaction that is contrary to that of the company. If the director does not abstain from any deliberation and resolution on such a transaction, the director is liable for any damages caused to the company.

Moroccan law provides for a number of specific offenses for which the general managers/directors of a PLC are criminally liable.

In addition, the competent court can order the persons held liable for certain acts to return to the company any profits they have made as a result of such acts.

The court may also prohibit the general managers/directors from directing, managing, administering, representing or controlling, directly or indirectly, any company for a period of 12 months.

Personal liability for directors may, in certain circumstances, arise under Mozambican legislation, including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption. In certain cases, criminal liability may arise.

A director may also be disqualified by the court (or by the Central Bank in case of companies supervised by this institution) from acting as a director or from taking part in the management of a company. A disqualification order can be made for a variety of reasons (e.g. conviction for criminal offences relating to the running of a company, persistent breaches of statutory obligations such as filing and keep the company’s books, being found liable for fraudulent or wrongful trading and generally for conduct which makes a director unfit to manage a company).

Specific industries place additional obligations on directors of companies in those industries.  These industries, for example, include banking and financial services.

The general principle is that a director is not held personally liable for the debts of the company.  There are, however, several instances where directors may be held personally liable for the debts or losses of the company.  The main instances are discussed below. 

• A director is personally liable for the debts of the company if that director personally bound themselves for the liability of the company, for example through signing a surety or guarantee.
• A director may also be held personally liable if that director breaches a warranty of authority or acts beyond their powers and the third party, with whom the director transacted, is unaware that the director does not have proper authority or is acting beyond the scope of their authority.
• A director may be held personally liable if they wrongfully procured a breach of contract by the company or deliberately committed an act that prevents the company from carrying out its duties under a contract.
• The Companies Act contains several other provisions where the directors can be held personally liable for the debts of or losses suffered by the company - for example where provisions relating to unauthorized loans to group companies, the use and publication of company names, the power of directors to issue shares and loans to directors are breached.
• A director may also be held personally liable where the director acted negligently.
• Finally, a director may be held personally liable where the director acted fraudulently or recklessly.

Tax debts, social security and pension premiums

Each individual director is responsible for adequate notification to the Dutch tax authorities, social security authorities and pension funds when the company is no longer able to pay certain taxes (including wage tax and VAT), social security and/or pension premiums. Notification must be made forthwith when it appears that the company is or will no longer be able to fulfil its payment obligations, and in any event within 14 days after the date on which the sums were due.

If the notification is not sent in time or not sent at all, the individual directors are jointly and severally liable based on the assumption that the non-payment is caused by mismanagement. An individual director who is able to prove that they are not responsible for the late notification will not be liable, however, such exculpation is subject to a high threshold.

Misleading accounts

If the (annual) accounts published by the company contain a misleading presentation of the financial situation of the company, the directors can be held jointly and severally liable towards third parties for damages suffered as a result.

There are over 100 sections of the Act which provide that a breach can constitute a criminal offence. In almost all these sections, criminal liability is imposed on the directors personally, in addition to the company (there do exist limited defences relating to reasonableness on the part of directors). Penalties can be up to NZD10,000 depending on the offence. Far more serious dishonesty offences can carry up to five years imprisonment or a fine of NZD200,000.

A director can also be liable for a tort (for example, negligence) committed primarily by the company, but through their agency – if they have assumed personal responsibility for their actions.

Directors can also be personally liable under New Zealand legislation. These include, among others, the Financial Reporting Act 2013, Fair Trading Act 1986, Financial Markets Conduct Act 2013, Health & Safety at Work Act 2015, Resource Management Act 1991, Commerce Act 1986, Privacy Act 2020, Overseas Investment Act 2005, the Building Act 2004 and the Takeovers Code. In certain cases, criminal liability may arise.

A director may also be disqualified by the court from acting as a director or from taking part in the promotion, formation or management of a company.  A disqualification order can be made for a variety of reasons (eg conviction for criminal offences relating to the running of a company, persistent breaches of statutory obligations such as filing documents with the companies register, being found liable for reckless trading or carrying on a business fraudulently and generally for conduct which makes a director unfit to manage a company).

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

A director may be held personally liable for taxes and related penalties that are due by the company if the director has breached the tax obligations of the company.

A director may be held criminally responsible if:

• The director committed a crime or participated in the commission.
• If they committed a criminal offence within the company related to its activities, even if the director was not directly involved in the commission of the crime (e.g. under the Labour laws, Economic and Financial Crimes Commission Act, Money Laundering (Prohibition) Act, Investment and Securities Act).

A director may also be disqualified by the court from acting as a director or from taking part in the promotion, formation or management of a company.  A disqualification order can be made for a variety of reasons (e.g. conviction for criminal offences relating to the running of a company, or being found liable for fraudulent or wrongful trading).

Personal liability for directors may, in certain circumstances, arise under Norwegian legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption.  In certain cases, criminal liability may arise.

Given that the directors are the administrators of the company, they are personally, jointly and severally liable (without limit) for contracts and, in general, for all legal acts performed if the company becomes irregular.

The liabilities comprise the fulfillment of the respective obligation, together with, if applicable, compensation for damages and losses caused by acts or omissions that directly damage the interests of the company, partners or third parties. The foregoing is in addition to any criminal liability of the liable parties.

Also, within the scope of anti-trust law, the directors of the company may be held liable if they have participated in the planning or execution of anticompetitive conduct.

In the tax field, the directors may be liable if they exercise the administration or have decision-making capacity in the disposition of necessary resources of the company to pay taxes, or if the duties of their position include the control of the accounting or finances of the company.

In the criminal area, the director of a company may be sanctioned with a penalty of up to four years if they are involved in bribery through which a favour is obtained in the acquisition or contracting of goods and services or, in general, through which a favour is obtained in the course of commercial relations.

Personal liability for directors may, in certain circumstances, arise under Polish legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption. In certain cases, criminal liability may arise.

Special rules of liability are set out in Polish tax law. Responsibility for the company’s tax arrears is jointly and severally borne by members of the company’s management board with their entire property, if enforcement proceedings against the company’s property appear to be entirely or partly ineffective, and if a member of the management board fails to fulfil certain obligations specifically set out in the Polish Tax Ordinance.

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines, restriction of liberty or even imprisonment for individual management board members.

Personal liability for directors may, in certain circumstances, arise under Portuguese legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption.  In certain cases, criminal liability may arise.

A director may also be disqualified by the court from acting as a director or from taking part in the promotion, formation or management of a company.  A disqualification order can be made for a variety of reasons (e.g. conviction for criminal offences relating to the running of a company, persistent breaches of statutory obligations such as filing documents with the companies register, being found liable for fraudulent or wrongful trading and generally for conduct which makes a director unfit to manage a company).

See Breach of general duties and Liabilities on insolvency.

Consideration should also be given to the fact that shared/common directors could, in certain circumstances, be considered as evidence in support of piercing the corporate veil.

The directors’ liability may also be triggered if regulations within various sectors are breached such as competition legislation, anti-corruption legislation, tax-related legislation, etc.

In certain circumstances, directors who engage in any of the following activities could face imprisonment of up to three years or fines up to SAR5 million:

• Deliberately making false or misleading statements in the financial statements or reports prepared or omitting in such statements or reports essential facts with the intent to conceal to the shareholders or others the financial position of the company.
• Using the company's funds for personal benefit or to personally benefit from company transactions or acting against the company's interests in order to personally benefit.
• Not convening the General Assembly or not taking the necessary actions in this regard, after becoming aware of losses in accordance with the relevant provisions of the KSA Companies Law.
• Liquidators’ misuse of company funds.

In certain additional circumstances, directors could face imprisonment of up to one year or fines up to SAR1 million.

Criminal liability of the directors can be engaged in the case of offences related to the management, administration and direction and dissolution of companies.

Personal liability for directors may, in certain circumstances, arise under legislation including those relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption.  In certain cases, criminal liability may arise.

A disqualification order can be made for a variety of reasons (e.g. conviction for criminal offences relating to the running of a company, persistent breaches of statutory obligations such as filing documents with the companies register, being found liable for fraudulent or wrongful trading and generally for conduct which makes a director unfit to manage a company). Please also refer to Who can be a director? for examples of relevant statutory breaches that would trigger disqualification.

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

A director is also personally liable if, for example, they breach the following obligations:

• To ensure that there is no violation of contractual obligations.
• To ensure that the company pays its taxes and advances in time and submits its respective tax declarations in accordance with Slovak tax legislation.
• To ensure that the company makes timely payments (in this respect, please note that non-payment of salary and severance payments is a crime under the Slovak Criminal Code for which also the statutory body of the employer is punishable).
• To ensure that all administrative law requirements are met fully and in a timely manner.
• To ensure that the company complies with the Slovak labour law regulations, etc.

Personal liability for directors may, in certain circumstances, arise under South African legislation including that relating to environmental and health and safety, anti-trust and bribery/anti-corruption.  In certain cases, criminal liability may arise.

Directors may also be declared deliquent or under probation if, amongst other things, they have breached their duties or certain obligations under the South African Companies Act. An order of deliquency or probation prevents a person acting as a director of a company (or places restrictions on their ability to do so) and a court may also order that compensation is payable to persons adversely affected by the director's conduct. 

An important issue is the possible liability for company’s debts (responsabilidad por deudas sociales): directors are jointly and severally liable for obligations arising after the occurrence of a cause for dissolution, when they have not called the general shareholders meeting within two months to adopt the dissolution or, where appropriate, when they do not apply for the judicial dissolution or the declaration of insolvency.

Personal liability for directors may, in certain circumstances, arise under Spanish legislation including liability relating to civil, employment, tax, corporate and environmental matters. In certain cases, criminal liability may arise.

Personal liability for directors may, in certain circumstances, arise under Swedish legislation including that relating to environmental and health and safety, tax and bribery/anti-corruption.

In certain cases, criminal liability may arise. When a crime is committed within a business operated by a legal entity, the legal entity may be subject to corporate fines (Sw. företagsbot), while individuals (such as members of the board of directors or the managing director) may be held personally liable for criminal offences under the Swedish Penal Code (Sw. brottsbalken). A precondition for an individual being held liable for criminal acts committed by the legal entity is that the criminal course of events have taken place within the scope of the company's business, that the violation has an objective connection to the company's business and that the individual has a responsibility for the criminal acts having taken place. Furthermore, criminal liability usually requires that the perpetrator must have acted with intent.

Furthermore, violation of certain provisions in the Swedish Companies Act may constitute a criminal act.  Such provisions cover (among others) the inaccurate maintaining of the share register, negligence in convening a board meeting upon the request of a member of the board of directors, the provision of inaccurate information to the members of the board of directors, and participation in an unlawful loan. Furthermore, certain instances of the provision of false information may constitute criminal acts. Finally, a board member or managing director may naturally also be held liable for their own criminal behavior, where they do not act on behalf of the company, including for fraud and breach of trust against a principal.

If a director or managing director has been declared bankrupt, has had a guardian appointed under the relevant legislation, or has been banned from trading, the Swedish Companies Registration Office must remove the representative from the Companies Register.

Personal liability for directors may, in certain circumstances, arise under various Tanzanian legislation including those relating to the winding up, delinquent trading, fraudulent trading, wrongful trading, environmental and health and safety, employment, consumer protection, tax, competition, and bribery/anti-corruption.  In certain cases, such liability can be criminal liability may arise.

A manager of a limited liability company can be held criminally liable for several offences, for example:

• At the time of the constitution of the company, a manager is criminally liable if they open directly or through an intermediary a public subscription to securities.
• A manager (who is also a shareholder) commits an offence if they make false declarations or a voluntary overvaluation relating to contributions in kind.
• Violation of obligations relating to accounting, the convening of general meetings, the communication and approval of financial statements or the appointment of an auditor.
• Presentation of annual accounts that do not reflect the true situation of the company and any use of company assets or credits committed in bad faith for personal purposes and not in the interest of the company.

It should also be noted that tax legislation and procedures provide that if the company has not complied with its tax obligations, the penalties incurred by the company (legal entity) also apply to any manager having the capacity to represent it.

Directors may incur personal liability for wilfully making false statements in company returns, reports, certificates, balance sheets, or other company documents.

Criminal liability may arise in certain cases of non-compliance with the statutory obligations of companies especially where it can be proved that the non-compliance was wilful or due to gross negligence. Additionally, the corporate veil may be lifted in cases of fraudulent dealing and the company’s directors held personally liable.

A director may be disqualified from acting as a director for three years for failure to keep proper accounting records, prepare and file accounts, send returns to the registrar, file tax returns and pay tax, or for allowing the company to trade while insolvent.

Onshore UAE

In some circumstances, directors who engage in any of the following activities could face criminal liability and up to two years imprisonment:

• Did not maintain commercial books sufficient to reveal the company's financial position or assets.
• Refrained from providing the data required by the bankruptcy trustee or the court, or intentionally provided incorrect data.
• Disposed of the company's assets after becoming cashflow-insolvent with the intent of depriving the creditors of those assets.
• Paid the debt of a creditor, while cashflow-insolvent, to the detriment of the other creditors or treated a creditor preferentially to other creditors, even if such acts were conducted with the intent of achieving a preventive composition or restructuring procedure.
• Disposed of company assets at a value less than their market price, or acted in a manner detrimental to the interest of the creditors with the intent to obtain funds in order to avoid or delay cashflow-insolvency, the adjudication of bankruptcy or the termination of a preventive composition or restructuring procedure.
• Spent disproportionate or excessive sums in gambling or speculative activities outside the company's usual business.
• Entered into disproportionate undertakings in favour of a third party without having regard to the financial status of the company at the time such acts were decided.

The UAE bankruptcy laws provide defences for directors/managers not involved in the crime or who vote against resolutions approving such acts.

Dubai International Financial Centre

A director may also be disqualified by the court from acting as a director. A disqualification order can be made for a variety of reasons (eg conviction for criminal offences relating to the running of a company, persistent breaches of statutory obligations such as filing documents with the companies register, being found liable for fraudulent or wrongful trading and generally for conduct which makes a director unfit to manage a company).

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

Personal liability for directors may, in certain circumstances, arise under UK legislation including that relating to environmental and health and safety, employment, consumer protection and bribery/anti-corruption.  In certain cases, criminal liability may arise.

A director may also be disqualified by the court from acting as a director or from taking part in the promotion, formation or management of a company. A disqualification order can be made for a variety of reasons (e.g. conviction for criminal offences relating to the running of a company, persistent breaches of statutory obligations such as filing documents with the companies register, being found liable for fraudulent or wrongful trading and generally for conduct which makes a director unfit to manage a company).

Failure to comply with company-related obligations, such as the preparation and filing of accounts, can also lead to fines for individual directors.

A key risk is a derivative action by a company’s stockholders for breach of fiduciary duties, which commonly happens in connection with M&A activity, securities offerings, data breaches, or other significant transactions or events.  In addition, directors may be held personally criminally or civilly liable for misconduct by the company or its employees, including violations of securities laws, environmental laws or the Foreign Corrupt Practices Act.  Additionally, directors may be held jointly and severally liable for unlawful share purchases or redemptions or dividends. Under “bad actor” laws, directors who have committed fraud or other crimes may be barred from serving as a director of a company offering or selling securities in the future.

Criminal liability now extends to failure to file annual returns and financial statements, these are duties of directors and where they are not complied with they shall be held liable.

Directors can also be held liable as agents of the company for failure to adhere to the relevant laws, these could include laws in the Companies Act, Competition and Consumer Protection Act, Zambia Environmental Management Act, Employment laws, Employment Code and taxation laws amongst others.

Personal liability for directors may, in certain circumstances, arise under Zimbabwean legislation.

The courts have been prepared to lift the corporate veil in situations under the alter ego doctrine. This involves situations where the individuals or individuals behind the corporation use the business as a mere mask for personal dealings.

The courts have specific guiding principles which are to be looked for in such situations such as absence of corporate formalities, inadequate capital, degree of separate property, financial interest of the individual, degree of control and any personal factor of the individual involved. The courts evaluation involves a balancing of considerations being the principle of separate personality against rising considerations or facts favouring piercing of the corporate veil.

If the courts enquiry dictates, the individual may be forced to pay the corporations' creditors from their personal funds.

Directors who act in a manner which is ultra vires, or which contravenes the COBE, may be liable to damages. There is also possible civil and criminal liability. If there is a contract in place, directors may also be held liable for breach of contract and any repercussions which may result from that breach.

The board is responsible for compliance with all of the above. Where the board fails to comply with the applicable laws, including non-binding rules and codes and standards, and if this causes any prejudice to the company, the directors can be held liable for any damages arises from such board's failure and can be held criminally liable where an offence has been committed.