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Home // COMPANY DIRECTORS: HIGH COURT RULES ON PERSONAL LIABLITY FOR EMPLOYMENT BREACHES

Can company directors be personally liable for their actions? At Nath Solicitors in London we advise a wide range of businesses, including start-ups, on the most appropriate corporate structure for their particular business – from partnerships to LLCs to limited companies. One of the reasons businesses choose to run their organisation through a limited company is because directors for the most part cannot be made personally liable for their actions as members of that limited company. But for company directors and individuals considering taking on such a role it’s important to note that there are exceptions to the no-personal liability rule. And the High Court has just highlighted this. In Antuzis v DJ Houghton Catching Services Ltd two directors were held personally liable for a company’s breach of employment law. We’ll look at the case below.

WHEN ARE DIRECTORS PERSONALLY LIABLE?

Exempting company directors from personal liability is a cornerstone of UK company law. But there are several key exceptions to the rule. A director who is active in the management of a company when he or she is disqualified for example, or a director who acts on the instructions of a disqualified person may be personally liable. Directors are also liable under certain sections of the Bribery Act 2010 and under some provisions of the Health and Safety at Work Act 1974. In addition a director can be held personally liable for dismissing an employee in response to that individual’s raising of a protected disclosure in the interests of the public (‘whistleblowing’).

So why were the directors personally liable in Antuzis v DJ Houghton?

ANTUZIS v DJ HOUGHTON

The case involved a group of Lithuanian workers who said they had been trafficked into the UK to work for a company that provided chicken catching services to farms throughout the UK. The workers provided evidence of extremely harsh working conditions where they:

  • were stopped from taking breaks
  • received payment far below the minimum wage
  • had wages held pack for spurious reasons

The court found the company in breach of several contractual and statutory breaches. But it went further, finding the sole director and the company secretary personally liable to the workers for the company’s breaches of employment law.

The court’s decision focused on the issue of director duties. There are a number of these, including a duty to promote the success of the company (s172 of the Companies Act, 2006). And this means acting in good faith and having regard to the:

  • likely consequences of any decision in the long term
  • interests of the company’s employees
  • impact of the company’s operations on the community and the environment
  • desirability of the company maintaining a reputation for high standards of business conduct’

Here the judge said that on the evidence it was not credible to suggest that the defendants (the sole director and company secretary) could have “believed that what was being done by them to the chicken catchers was morally or legally sound”. In addition the two company officers had effectively ruined the reputation and profitability of the company.

COMMENT

A note of caution about the Antuzis case. It doesn’t expose directors to personal liability simply because a company breaches employment or other laws. The facts of Antuzis were extreme, involving deliberate statutory breaches that amounted to modern day slavery and ruined the company’s reputation. It was also clear to the judge that the two defendants knew they were acting in a way that would damage the company. They didn’t have the good faith required to shield them from responsibility.

So the case is a warning to directors – if any were needed – about exploiting workers. Especially when the exploitation damages the company. The case doesn’t appear to open the floodgates to claims against directors but it demonstrates clearly the need for anyone taking on a directorship to satisfy themselves that they are comfortable with the duties and the risks of such a role.

For advice on company law, you can call our director Shubha Nath on +44 (0) 203 670 5540 or contact us online.

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