The government is considering ways to make company directors more accountable for their business failures, including making them liable for money owed to creditors.
Business secretary Vince Cable spoke at the Responsible Capitalism conference today to mark the launch of the Transparency and Trust paper. The document sets out proposals for making corporate ownership structures more transparent and increasing the stringency of director disqualification laws.
Suggestions include creating a national registry of information on individuals holding more than 25 per cent of shares or voting rights in a company and the abolition of so-called "bearer shares". The paper also raises the possibility of obliging nominee directors to declare their status to Companies House, and the abolition of corporate directorships, wherein a company is registered as a director of another company.
Suggested new measures for individual directors include allowing courts to make creditor compensation awards against individuals if they are deemed to have acted fraudulently or recklessly. Other proposals include extending the time limit for disqualification action against the director of an insolvent company from two to five years.
Also on the table is the idea of preventing individuals disqualified from directorships in other countries from assuming director roles in the UK. Disqualified directors may also be offered "education" in return for a reduction in the disqualification period. Additionally, the government is to review the occasionally controversial use of pre-pack administrations and will be looking at ways to improve the trust in insolvency practitioners.
Cable (pictured) said: "A stronger economy depends on investors, employees and the wider public having trust and confidence in companies and those who are running them. The reality is that the vast majority of companies and directors contribute productively to the economy, abide by the rules and make an enormous contribution to society. However, it is also apparent that an errant few operate in the shadows, creating complex ownership structures which only serve to deceive.
"With a strong commitment coming from the G8, we are now shining a light on who really owns and controls companies in the UK. We are also proposing tough measures to beef up the system for holding directors to account if they do not play by the rules or take their responsibilities seriously. This will mean honest, hard-working directors are not disadvantaged and will give the public greater confidence that irresponsible directors will face consequences for their actions."
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