Can I hold my customer personally liable for unpaid invoices?
A customer goes bankrupt and you are at a loss what to do. What do you do now? Can you hold the directors or managers personally liable for the outstanding invoices? Sometimes you can, sometimes you cannot. Much depends on the type of company that goes bankrupt. Find out how things work here.
Your bankrupt customer is a sole proprietor
Sole proprietorships are the most common form of business, especially for starters. It is established by a natural person, with the emphasis on one person. This means that there is no clear separation between his or her private assets and the assets of the business.
If your client is a sole proprietor, the owner is jointly and severally liable without limitation. In other words, as a creditor you can seize personal property. Think of cars, savings accounts and (in extreme cases) even houses.
But beware! A sole proprietorship can be declared excusable by the court. In doing so, the court will rule that your client has not made any personal mistakes. As a result, he or she can no longer be sued (by you and other creditors) for debts that remained unpaid after the bankruptcy.
Your bankrupt client is a public limited company, private limited company or cooperative society
Unlike the sole proprietorship, the public limited company, private limited company and cooperative society are independent legal entities. This means that you cannot hold the partners personally liable. The private assets and the assets of the company are separated.
But: the private assets of a director or manager are not always guaranteed protection in the event of bankruptcy. If the court rules that this person personally contributed to the bankruptcy by making an evidently serious mistake, the court can oblige them to pay (part of) the debts with personal means.
In that case, as a creditor you still have a chance to collect unpaid invoices. Directors and managers are only personally liable for the capital that they themselves have contributed to the company.
Your bankrupt client is a general partnership, limited partnership or cooperative partnership with unlimited liability
With a general partnership, cooperative partnership with unlimited liability and limited partnership things are different again. These companies have their own legal entity, but the partners have unlimited personal and joint and several liability. As a creditor, you can therefore hold them personally liable in the event of bankruptcy.
Going after unpaid invoices is never fun. You lose a lot of time that you would rather spend on the core activities of your company. If your customer goes bankrupt, Unpaid will unfortunately not be able to help you further in recovering your invoices. Therefore, we advise you to always intervene early when an invoice remains unpaid.
Contact us as soon as the due date has passed and we will help you further. We will collect your invoice up to 10 times faster than a classic court procedure.