A director and a company are separate legal entities. Where the company has incurred debt, the company is liable for that debt. In a liquidation of the company, a liquidator cannot take possession of a director's personal assets to meet the creditors’ claims in a liquidation. A director's personal assets are only exposed if the director is sued in his or her personal capacity. A director may be held personally liable for company debts under 3 possible circumstances. Firstly, where the director has signed a personal guarantee. Secondly, where the director is subject to an automatic penalty or has received and failed to comply with a Director Penalty Notice from the ATO, the director can be held personally liable for unreported or unpaid superannuation or PAYG withholding tax. Thirdly, where in a liquidation of the company a liquidator or a creditor pursues an action against a director for insolvent trading. Insolvent trading generally is the incurrence of debt during the trading of the business where the director knew, or ought to have known, that the company was not going to be able to pay that debt.