The Limited Liability of Company Directors

The prevailing wisdom is that principle of limited liability protects shareholders and only of shareholders from liability. In this article, the author explores this premise from the perspective of the historical development of limited liability, the principal economic justifications for limited liability, and the doctrinal implications of immunising directors from personal liability for their actions in managing the affairs of the company. The authors principal conclusions are that limited liability need not be understood as a wholly statutory concept, that the economic justifications for limited liability for shareholders apply with considerable force to directors, and that an extension of protection to directors is not inconsistent with the fundamental doctrinal functions of company law.