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One effect of this provision is that the directors and shareholders of a business are not held directly responsible for the actions of the company. Liability for the actions of a company lies with the company itself in the first instance, and as a result the directors and shareholders are said to enjoy a ‘corporate veil’ of legal protection. There are a number of exceptional circumstances where the corporate veil is said to lifted, and as a result the directors and or shareholders can be held directly liable for the actions of the company itself. For public companies a failure to obtaining a trading certificate which confirms that the public company meets legal requirements for share capital can expose the directors of the company to liability. The Companies Act 2006 makes it a criminal offence when a director of a private or public company fails to use the company’s name in official business, an offence which is punishable with a fine. In the main however, the corporate veil is lifted when the practice of the company is considered to be negligent, fraudulent, unfair or wrongful. In such cases a court can seek financial reparations from directors or shareholders if it feels that they were culpable in the illegal trading which took place. Where a company is placed into insolvency, the courts can pursue directors and shareholders for reparations, even if the company reforms under a different name. So called phoenix companies are not exempt from legal provisions and the courts can pursue former directors in their new roles.
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