Debts and Liabilities in a Partnership
We have started a PVT Ltd company in 2012 and we were four directors , one of the director left us in 2014 and we were in good business until 2015 , after that we have incurred heavy losses and took an unsecured loan from relative of our managing director and the project did not go well and now our MD want to get his resignation accepted and threatening me if I don't accept he will get it done by the other director who is his family member and threatening me alone to give the commitments for the debt to be repaid , if he gets his resignation accepted will I be whole responsible for the debts and can you please advise me how to go through this situation.
The director is not individually liable for the debt of the company.
In this situation, you cannot be held personally liable for the payment of the Compay's debts, if you have not taken this loan in your individual capacity. The liability will lie only when a director has taken the loans in his individual capacity or by fraudulent means. Any loan taken for the company will become the collective responsibility of the Company for its repayment.
Source: Liabilities Of Directors; Persons Who Can Bring Actions Against The Directors, Narasappa, Doraswamy & Raja, 21 November 2011. Available here.
Answered by Shreyan Acharya, Lawfarm Researcher.
Why not create one now for free in under 10 minutes!