Expert Answers
RTM
1 August 2026Can RTM or RMC directors be personally liable?
The question
We are volunteer directors of our RTM company. If something goes wrong with the building or the finances, can we be held personally liable?
Short answer
Usually not for the company's ordinary obligations. An RTM company or RMC is a separate legal person, so its contracts, debts and service charge obligations belong to the company rather than to individual directors. Limited liability does not, however, protect a director from the consequences of their own conduct. Personal exposure can arise through a personal guarantee, fraud or dishonesty, serious breach of directors' duties under the Companies Act 2006, wrongful or fraudulent trading, unlawful payments, acting outside authority, or specific health, fire and building safety offences that allow proceedings against officers personally.
The starting point is the company
An RTM company or RMC is a separate legal person. Its contracts, its debts and its service charge obligations are the company's, not the directors'. Volunteer directors are not personally on the hook simply because the company owes a contractor money or a leaseholder disputes a charge. That protection is real and it is the reason the corporate structure is used.
Where the protection stops
Limited liability protects a director from the company's obligations. It does not protect a director from their own conduct. Exposure can arise where:
- A personal guarantee has been given. Occasionally a bank, a landlord or a contractor asks a director to guarantee an obligation. That is a personal contract and it binds the individual.
- There has been fraud or dishonesty. Misappropriation of funds, false accounting or deliberate misstatement is personal.
- A director has breached their statutory duties. The Companies Act 2006 sets out general duties, including to act within powers, to promote the success of the company, to exercise reasonable care, skill and diligence, and to avoid conflicts of interest. Serious breach can lead to a claim by the company.
- Wrongful or fraudulent trading is alleged. If the company continues to incur liabilities when the directors knew, or ought to have concluded, that insolvent liquidation could not reasonably be avoided, a liquidator may pursue them.
- Distributions or payments were unlawful. Paying out money the company was not entitled to pay out can be recoverable from those who authorised it.
- A statutory offence carries personal liability. Certain health and safety, fire safety and building safety provisions allow proceedings against an officer of the body corporate where an offence was committed with their consent or connivance, or attributable to their neglect.
- A director acted outside their authority. Committing the company to something the board never approved can leave the individual exposed.
- Litigation conduct is unreasonable. Costs orders can in some circumstances follow personal conduct in proceedings.
Keep the categories separate
It helps to distinguish four different things: the company's ordinary contractual debts, directors' duties owed to the company, personal wrongdoing, and regulatory or criminal exposure under specific legislation. Most anxious questions from volunteer directors are really about the first category, where the answer is reassuring.
Practical protection
Good governance is the main defence, and it is unglamorous:
- hold proper board meetings and minute decisions and the reasons for them;
- declare and record conflicts of interest, and stand back from affected decisions;
- keep company filings and service charge accounts up to date;
- act on fire risk assessments and compliance reports rather than deferring them;
- take professional advice on significant technical or legal questions and record that you did;
- consider directors' and officers' insurance, understanding that it will not cover every form of liability, and typically excludes dishonesty and certain penalties.
Being unpaid does not lower the standard expected, and nor does being a volunteer. But a director who takes decisions carefully, records them, and takes advice when out of their depth is very rarely the person who ends up with a personal problem.
Important qualifications
- Directors'' and officers'' insurance does not cover every form of liability and typically excludes dishonesty and certain penalties.
- Being an unpaid volunteer does not lower the standard of care expected of a director.
- Personal liability under safety legislation generally requires consent, connivance or neglect rather than mere office-holding.
- Insolvency changes the picture: duties shift towards creditors as insolvency approaches, so early advice matters.
Practical steps
- Hold and minute board meetings, recording reasons and alternatives considered.
- Maintain a register of directors'' interests and declare conflicts as they arise.
- Keep Companies House filings and service charge accounts current.
- Act on fire risk assessments and compliance reports, and record completion.
- Do not give personal guarantees without advice.
- Review directors'' and officers'' insurance cover and its exclusions.
- Take specialist advice early where the company may be unable to pay its debts.
What this means in practice
Careful, minuted decision-making and prompt action on compliance reports remove most of the realistic risk for volunteer directors.
If you are one of the rtm directors
- Minute decisions on expenditure, contractor selection and compliance.
- Take advice before committing the company to long or high-value obligations.
If you are one of the rmc directors
- Check whether the company holds directors'' and officers'' insurance and what it excludes.
- Make sure filings and accounts are not left to a single person.
If you are one of the leaseholders
- Recognise that directors are volunteers with statutory duties, not employees.
- Raise concerns through the company''s formal channels so they are recorded and addressed.
Common mistakes
Making decisions informally by message
Without minutes there is no record of what was decided, by whom, or why, which is exactly what a director needs if questioned.
Ignoring fire or safety recommendations because of cost
Deferred safety actions are the most likely route to regulatory exposure, and cost is rarely a complete answer.
Signing personal guarantees to get a service started
A guarantee sidesteps limited liability entirely and often outlasts the director''s time on the board.
Assuming insurance solves it
Policies exclude significant categories of liability and can be voided by late notification of a claim.
When to seek professional advice
Most questions on this topic are management questions rather than legal ones, and the two are worth separating. A managing agent can tell you how something works day to day and what it will cost. A solicitor tells you what your rights are and how a Tribunal is likely to view them.
Speak to a managing agent when
- Setting up governance, board reporting and minute-taking that stands up to scrutiny.
- Keeping compliance actions tracked and evidenced.
- Preparing service charge budgets and accounts on time.
- Reviewing management arrangements to reduce reliance on one director.
Take specialist legal advice when
- Where insolvency of the company is a realistic possibility.
- Where a personal guarantee has been requested or already given.
- Where a regulator, enforcement authority or the Tribunal has become involved.
- Where a claim is threatened against a director personally.
East Valley Properties provides management expertise, not legal advice. Where a matter turns on the wording of your lease or on formal proceedings, we will say so and work alongside your solicitor.
Primary sources
The official material behind this guide. We summarise it in plain English rather than reproducing it.
- Companies Act 2006
Including the general duties of directors in Part 10.
- GOV.UK - Being a company director
Plain English summary of what directors must do.
- GOV.UK - Personal and company debts
How company debts differ from personal debts.
Running or setting up an RTM company?
We act as managing agent for RTM companies across Greater London and Essex, covering service charge accounting, compliance and contractor management on fixed fees.
Answered by Romain Maillard - Director, East Valley Properties
Romain manages residential blocks and estates for RTM companies, residents' management companies, share of freehold developments and freeholders across East London and Essex.
Published
This answer has been anonymised. Personal details, addresses and company names have been removed. Guidance is general and does not replace advice from a solicitor or surveyor on your specific block. East Valley Properties is a managing agent, not a firm of solicitors or legal advisers.
Ask the Expert
Have a Question About Your Building?
Whether you're an RTM Director, RMC Director, Freeholder or Leaseholder, our experienced block management team is here to help.
If your question could help other property owners, we may publish an anonymised version of the answer in our Knowledge Centre.
Need advice sooner?
Book a free consultation with East Valley Properties to discuss your building, service charges, compliance or managing agent requirements.