Can I be personally liable for my company's debts?
It's the question that keeps directors awake at night — if my company goes under, do they come after my house, my car, my savings? Here's the honest answer, and the one exception that catches most people out.
The general rule
A company is a separate legal person from its directors. That's the whole point of a (Pty) Ltd. So as a general rule, company debts are the company's responsibility, not yours personally. When the company is liquidated and dissolved, those debts are written off — and creditors cannot pursue you for them.
For most directors of honestly-run businesses that simply failed, this is the reality: liquidation closes the company, and you walk away without personal liability for the company's debts.
The one big exception: personal sureties. If you signed a personal surety or personal guarantee for a company debt, that debt remains yours after liquidation — regardless of the company closing.
Personal sureties — the thing that catches people
Here's what most directors don't realise: they've almost certainly signed personal sureties without thinking much about it. Banks, landlords, suppliers, and vehicle financiers very commonly require a director to sign personal surety before extending credit to a company.
When you sign a surety, you personally promise to pay if the company can't. So if the company is liquidated, the creditor can still come after you personally for that specific debt. This is why, where sureties exist, a follow-on personal sequestration is often the right step to deal with the residual liability.
The good news: we identify every surety during your free assessment, so there are no nasty surprises — and we can plan for both the company liquidation and any personal exposure together.
The other exceptions
Beyond sureties, directors can be held personally liable in specific situations:
- Reckless or fraudulent trading — continuing to take on debt when you knew the company couldn't pay it.
- PAYE and UIF deducted but not paid over — if you deducted these from employees' wages but didn't pay SARS, directors can be held personally responsible.
- Hiding or transferring assets before liquidation to keep them from creditors — this is a criminal offence.
- Breach of fiduciary duty — using company money improperly or acting against the company's interests.
Notice the theme: these all involve dishonesty or recklessness. Acting honestly and liquidating voluntarily as soon as you realise the company can't recover is itself your best protection.
What about reckless trading?
"Reckless trading" means continuing to operate while insolvent — racking up new debts you know the company can't pay. Under the Companies Act, directors who do this can be held personally liable for those debts. The way to avoid it is simple: act promptly. Voluntary liquidation shows you stopped responsibly rather than trading recklessly.
The bottom line
If your company failed honestly and you didn't sign personal sureties, you're very likely protected. If you did sign sureties — as most directors have — we need to plan for those specifically. Either way, the answer comes from looking at your actual situation. This article is general guidance; contact us for a free, confidential assessment of where you personally stand.
Every case is unique.
This article is general guidance and may change as laws change. Contact us for a free, confidential assessment of your specific situation before you act.