Time limits for claims against directors

Q: How might the dates work in practice?

Illustration only. A company enters creditors' voluntary liquidation in May 2026. The liquidator reviews the records and finds three issues: In March 2019 the director signed a supply contract on terms that lost the company £60,000. There was no personal benefit. This is a negligence type claim and, absent concealment, the six years ran out in March 2025. Between 2018 and 2020 the director transferred £35,000 of company money to his own account and recorded it in the ledger as consultancy fees paid to a third party. The false entries amount to concealment, so time runs from discovery. The money was also company property received by the director and converted to his use, so section 21(1)(b) means no limitation period applies. In 2024 the director paid a dividend without distributable reserves. This is well within six years, and the liquidator can also look at the director's loan account; see our page on unlawful dividends.

Q: What mistakes do people make about limitation?

Counting from the liquidation date. The clock usually starts with the breach, not the insolvency. Assuming a fiduciary label always means no time limit. Section 21(1) is limited to fraud and to recovering property the director holds or has converted. An honest breach that caused loss but gave the director nothing is generally caught by the six year rule. Ignoring concealment. Misleading ledger entries or withheld records can postpone the start of the period under section 32, so directors should not assume old conduct is safe. Destroying records too soon. Company records retention rules and the possibility of unlimited claims over company property are good reasons to keep evidence of how money was spent and approved. Company directors can protect the business against the cost of an HMRC check with tax investigation insurance, which pays up to £100,000 of accountant's fees with Solar Protect. Read how our cover works or get a quote.

Most claims by a company against its directors in England and Wales must be started within six years, whether they are framed as negligence, breach of contract or breach of fiduciary duty. The main exceptions are claims for fraud and claims to recover company property a director still holds or has taken for their own use, where section 21(1) of the Limitation Act 1980 sets no time limit at all, and cases of deliberate concealment, where the clock does not start until the wrong is discovered.

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Which law sets the time limits?

The Companies Act 2006 sets out directors’ duties but does not set its own limitation periods for breaching them. Section 178 says the consequences of breaching sections 171 to 177 are the same as if the corresponding common law rule or equitable principle applied, and that those duties, except the duty of care, skill and diligence in section 174, are enforceable in the same way as any other fiduciary duty owed by directors. So the time limit depends on how the claim is classified, and that classification is made under the Limitation Act 1980, which applies in England and Wales. Scotland has its own rules, covered below.

Our page on directors’ duties under the Companies Act explains the duties themselves; this page deals only with how long a company, liquidator or administrator has to sue.

What is the six year rule?

Several provisions of the Limitation Act 1980 point to six years from the date the cause of action accrued:

Type of claim	Provision	Period
Negligence (tort), for example a careless breach of the duty in section 174	Section 2	Six years
Breach of a service contract	Section 5	Six years
Breach of trust where no other period applies	Section 21(3)	Six years
A sum recoverable by virtue of an enactment	Section 9	Six years
Fraud, or recovery of trust property held or converted by the trustee	Section 21(1)	No limit

For claims seeking equitable relief, section 36 says the periods in sections 2, 5 and 9 do not apply directly, but the court may apply them by analogy, and it keeps its equitable power to refuse relief because of acquiescence or delay. In practice that means a claimant should not assume that an equitable claim gives it longer than six years.

The six years usually run from the date of the breach and loss, not from the date the company went into liquidation. A liquidator appointed in 2026 who finds a careless decision taken in 2019 may already be out of time unless one of the exceptions applies.

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Why do some claims over company property have no time limit?

A director who controls company money or assets is treated as holding them on trust for the company. The Insolvency Service’s technical guidance for official receivers says, at paragraph 32.40, that a company director is considered to be a trustee for the company’s property which comes under their control, and that a director who has misapplied, retained or otherwise become accountable for that property must make good the resulting loss and any personal gain.

This is important for limitation because section 21(1) of the Limitation Act 1980 says no period of limitation applies to an action by a beneficiary under a trust:

in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or
to recover from the trustee trust property or its proceeds in the trustee’s possession, or previously received by the trustee and converted to their own use.

Section 38 of the 1980 Act gives trust and trustee the same meanings as in the Trustee Act 1925, and section 68(17) of that Act extends them to implied and constructive trusts. So where a director has taken company money for themselves, or still holds a company asset, the company (usually acting through a liquidator) can seek to recover it however long ago it happened. Where the director acted honestly and kept nothing, but caused loss through a poor decision, the ordinary six year rule applies.

Can the six years be extended?

Yes, under section 32. Where the action is based on the defendant’s fraud, or a fact relevant to the claim has been deliberately concealed by the defendant, or the action is for relief from the consequences of a mistake, the period does not start until the claimant discovered the fraud, concealment or mistake, or could with reasonable diligence have discovered it. Section 32(2) adds that deliberately committing a breach of duty in circumstances where it is unlikely to be discovered for some time counts as deliberate concealment.

This is often decisive in director cases. A director who disguised payments to themselves as supplier invoices, or kept a second set of records, cannot rely on the passage of time from the date of the payments. Section 32(3) protects an innocent third party who has since bought the property for value.

Does a misfeasance claim have its own time limit?

Section 212 of the Insolvency Act 1986 gives the official receiver, liquidator, any creditor or contributory a summary route to ask the court, in a winding up, to examine an officer’s conduct and order them to repay, restore or account for money or property, or to contribute compensation. The section does not contain its own limitation period. It is a procedure for enforcing existing duties, so the analysis above about the type of underlying claim is what decides whether the claim is in time. Our page on misfeasance claims explains how those claims are brought.

What other deadlines apply to directors of failed companies?

Separate time limits apply to action by the Secretary of State under the Company Directors Disqualification Act 1986:

Under section 7(2), an application for a disqualification order under section 6 cannot be made, except with the leave of the court, after the end of three years beginning with the day the company became insolvent or, for a company dissolved without becoming insolvent, the day it was dissolved.
Under section 15A(5), an application for a compensation order may be made at any time before the end of two years beginning with the date the disqualification order was made or the undertaking accepted.

See our pages on director disqualification and compensation orders against directors.

Is it different in Scotland?

Yes. Scotland uses prescription under the Prescription and Limitation (Scotland) Act 1973, which extinguishes the obligation itself. Section 6 extinguishes obligations to which it applies after five years without a relevant claim or acknowledgement, and the period is extended where fraud or error induced by the debtor caused the creditor not to claim. Section 7 sets an outer limit of 20 years. Schedule 3 lists imprescriptible obligations, which include a trustee’s obligation to make reparation or restitution for a fraudulent breach of trust to which the trustee was a party or privy, and to make furthcoming trust property or its proceeds in the trustee’s possession or make good the value of property they appropriated to their own use. The broad pattern is therefore similar to England and Wales, but the periods and mechanics differ, and Scottish advice is needed for a Scottish company.

How might the dates work in practice?

Illustration only. A company enters creditors’ voluntary liquidation in May 2026. The liquidator reviews the records and finds three issues:

In March 2019 the director signed a supply contract on terms that lost the company £60,000. There was no personal benefit. This is a negligence type claim and, absent concealment, the six years ran out in March 2025.
Between 2018 and 2020 the director transferred £35,000 of company money to his own account and recorded it in the ledger as consultancy fees paid to a third party. The false entries amount to concealment, so time runs from discovery. The money was also company property received by the director and converted to his use, so section 21(1)(b) means no limitation period applies.
In 2024 the director paid a dividend without distributable reserves. This is well within six years, and the liquidator can also look at the director’s loan account; see our page on unlawful dividends.

What mistakes do people make about limitation?

Counting from the liquidation date. The clock usually starts with the breach, not the insolvency.
Assuming a fiduciary label always means no time limit. Section 21(1) is limited to fraud and to recovering property the director holds or has converted. An honest breach that caused loss but gave the director nothing is generally caught by the six year rule.
Ignoring concealment. Misleading ledger entries or withheld records can postpone the start of the period under section 32, so directors should not assume old conduct is safe.
Destroying records too soon. Company records retention rules and the possibility of unlimited claims over company property are good reasons to keep evidence of how money was spent and approved.

Company directors can protect the business against the cost of an HMRC check with tax investigation insurance, which pays up to £100,000 of accountant’s fees with Solar Protect. Read how our cover works or get a quote.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.