If you operate through a limited liability company it is tempting to think that you cannot be held responsible for its actions. Generally, your liability as a shareholder of a company is limited to the nominal value of your shares (together with any share premium you may have agreed to pay). In addition, if you are a director of a company, who has acted properly, then you should not be responsible for the actions of the company.
However, the recent case of Grenade (UK) Limited -v- Grenade Energy Limited & Anr is a reminder that even if you operate through a limited company you may still be personally liable for its actions.
Most business owners will not be surprised to hear that operating through a company will not protect them from criminal liability nor that there are certain Acts of Parliament which provide for the personal liability of company directors (for example, the Data Protection Act 1998). However, the news that a sole director and shareholder has been held jointly responsible for his company’s trade mark infringement and passing off may come as a surprise.
The defendant company was sued for trade mark infringement and passing off. It was found that the defendant company had no reasonable prospect of defending those allegations. The claimant also claimed that the sole director and shareholder of the defendant company should be jointly responsible for the company’s actions because he had actively co-operated with the company to bring about the infringements and he intended that that co-operation would bring about the infringements.
The court found that, in the case of a sole director and shareholder that there was a presumption that all of the acts of the company were done at his instigation. In effect, a sole director and shareholder have to show why the infringements were not initiated and controlled by him. In this case, he did not do so and therefore was held liable to the claimant.
If you need any advice on trademarks or any business dispute contact Victoria Spellman on 01473 298181 or email [email protected]