Personal liability of company directors for tax arrears rejected absent express statutory authority

A managing director of a limited liability company is not personally liable for the company's sales tax arrears unless a statute expressly creates such liability. The High Court held that the company remains a separate legal entity, so tax recovery must be confined to the company's assets and cannot be directed against the director's personal assets merely because of his office. Provisions relied on for tax collection did not authorise recovery from a director as if the arrears were a fine, and the recovery direction was therefore set aside.

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Issues: Whether the managing director of a limited liability company can be made personally liable for arrears of sales tax due by the company and whether such arrears can be directed to be recovered from him as if they were a fine.

Analysis: The liability for the tax was that of the company as a distinct legal entity. In the absence of a statutory provision creating personal liability, directors or managing directors of a limited liability company cannot be proceeded against personally for company debts or taxes. The provisions relied on by the prosecution dealt with collection and recovery of tax in different situations and did not authorise personal recovery from a director. The Companies Act provisions also indicated that revenue and taxes due from the company are recoverable from the company's assets, and not from the personal assets of directors.

Conclusion: The managing director was not personally liable for the company's sales tax arrears, and the direction for recovery of those arrears from him as if they were a fine was set aside in his favour.

Final Conclusion: The tax authorities were confined to the assets of the company for recovery, and no personal liability could be fastened on the petitioner merely by reason of his office as managing director.

Ratio Decidendi: A director of a limited liability company cannot be personally proceeded against for company taxes unless a statute expressly creates such personal liability; recovery lies against the company and its assets.

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