A company and its individual directors and individual shareholders are all separate legal entities. The director(s) control the company and the shareholders own the company. Although directors have a general duty to take the shareholders’ interests into account when making decisions on behalf of the company, the directors’ decisions will, at the end of the day, be based on his or her own beliefs of what is best for the company.
The legal separation between a company and its director(s) means that directors will generally not be personally liable for losses incurred by the business.
Business activity inherently involves risk. When trying to achieve the best returns for their company, directors can sometimes be drawn towards higher-risk ventures. This must be weighed up against a directors’ general legal duties and obligations.
Where directors overstep their duties, they could be held personally liable for losses the company may incur as a result. As such, whether you are an official director or a shadow or de facto director, any allegation that you have breached a legal duty should be taken seriously.