What Is The Liability Of Directors And Shareholders Of Public Limited Company (PLC)?

Liability of Directors and Shareholders in a Public Limited Company (PLC)

LIABILITY OF DIRECTORS

Directors in a PLC have important responsibilities and potential liabilities.

1) Fiduciary Duties: Directors are required to prioritize the company and its shareholders' best interests, as emphasized in the reference material, and failure to do so can result in legal action for a breach of these duties.

2) Statutory Duties: Directors are bound by specific duties established in company laws and regulations, and non-compliance can lead to legal repercussions.

3) Financial Liabilities: Directors may be personally liable for certain financial obligations, such as unpaid taxes and debts, in cases of fraud, negligence, or wrongful trading.

4) D&O Insurance: To shield directors from personal liability, many companies offer Directors and Officers (D&O) insurance, which includes coverage for legal defense expenses in the event of lawsuits.

5) Civil and Criminal Liability: Directors may be liable to civil lawsuits for decisions or actions harming the company or shareholders, and in cases involving fraud or criminal misconduct, they could also face criminal charges.

LIABILITY OF SHAREHOLDERS

Shareholders in a PLC have limited liability, but there are exceptions.

1) Limited Liability: Shareholders typically have limited liability, meaning their personal responsibility for the company's debts and obligations is restricted to the amount they've invested in the company.

2) Unpaid Shares: Shareholders may be liable to pay for unpaid shares under specific circumstances determined by applicable laws or the company's articles of association.

3) Fraudulent or Unlawful Activities: Shareholders engaged in fraudulent or unlawful activities related to the company may face personal liability for their actions.

4) Separate Legal Entity: PLCs are separate legal entities from their shareholders, providing a shield against personal liability for the company's actions and debts.