Limited Liability Has Its Limits

One of the principal reasons for incorporating a business is to benefit from the fact that the liability of company shareholders is limited. However, this protection is not absolute and a recent decision by the Intellectual Property Enterprise Court illustrates one way in which a shareholder may still have personal liability.

The Court ruled that a website advertising escort services in South Africa contained photographs which infringed the UK copyright of the claimant, because they were targeted at the public in the UK. Whilst primarily a copyright infringement case, the Court also ruled that the sole shareholder and director of the company which owned the rights to the website and published the content was personally liable for the copyright infringement, in addition to that company. This has important implications for directors of UK companies, especially if they are sole directors and shareholders.