If you are a company shareholder, your personal liability is limited to any unpaid amount owing for the purchase of shares in the company. As a shareholder, you cannot be held liable for the debts of the company.

The situation is more complex if you are a company director. As a director, you may be held liable for the debts of a company, and even risk losing personal assets in some circumstances. Subsequently, it is important to uphold your obligations as a director, including ensuring the company can meet its financial obligations at all times.

Directors can be held liable for the debts of a company if those debts are accumulated at a time when the company was unable to pay its debts when they fell due. More simply, if you are a director and the company is trading while insolvent, its debts can be your responsibility. That's because one of the core legal duties of a company director is to ensure it remains solvent and able to pay its debts as they fall due.

In other situations, if you are found to be in breach of one or more of your director's duties, you may be obliged to compensate the company for any losses it incurs as a result of your failure to uphold your duties as a director.

If you are a director of a company that is acting as trustee for a trust, you may also be personally liable for losses incurred by the company.

Directors may also be responsible for criminal or civil penalties incurred. In other words, directors can be sent to gaol or forced to pay fines and damages if the company is sued or breaches laws with criminal consequences.

In some instances, a director's personal assets may be at direct risk.

A bank or other entity lending money to a company may require directors to offer personal guarantees in order to secure the finance. A lender may even insist on taking a mortgage over a director's personal home or other assets as 'security' for a loan issued to the company.

In the event that the company fails to repay the loan, the lender has the right to sell the director's personal assets to recover the amount owing