Directors liability

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Querist : Anonymous

Querist : Anonymous (Querist)

13 February 2012 hi,
dear please details about the provision of directors personal liability in case of private limited co., . Also in case of issue of cheques (which are not honoured by bank due to insufficient fund) as a directors of company.

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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14 February 2012 As a general rule, since the company and its Director are separate entities, the Director has no personal liability
on behalf of the company. However, under certain circumstances, a Director may be held liable on behalf of the company

Under the Negotiable Instruments Act, 1881, if a company issues, and later dishonours a cheque which was presented for discharge of debt or other liability,every person who at the time of such dishonor was in charge of overall control of the day-to-day business of the company (both under law and as a matter of fact), shall be deemed to be guilty of the offence and shall be liable to be proceeded against. If the offence is committed with the consent or connivance of, or is attributable to the neglect of the Director, such Director shall be deemed to be guilty and liable to be proceeded against.

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