Written by: Keith Tully
Published: 29th March 2018
The government has outlined a series of proposals that it hopes will help to tighten up rules around corporate governance in insolvency scenarios throughout the UK.
The plans could see directors who sell companies “recklessly” hit with new sanctions and others who dissolve companies to dodge debts coming under official investigation.
Meanwhile, creditors could have money returned to them through a process of reversing what is deemed to be inappropriate asset stripping.
Overall, the government says its intention is to strengthen standards of corporate responsibility and help to maintain the UK as “one of the best places to start and grow a business”.
To that end, the government is now inviting contributions from relevant parties in response to its newly-outlined plans for a corporate insolvency overhaul.
A key focus of the consultation is trying to find ways to prevent company directors from unfairly shielding themselves from the effects of insolvency while their employees and their suppliers are left to lose out.
The government’s plans include strengthening the capacities and the powers of the Insolvency Service to tackle issues relating to the behaviour and actions of directors whose companies have been dissolved.
Roles and responsibilities of shareholders are also expected to be strengthened as part of the planned restructuring of relevant regulations.
“Britain has a good reputation internationally for being a dependable place to do business, based on required high standards,” said business secretary Greg Clark.
“This framework has been regularly upgraded and in the light of some recent corporate failures I believe the lessons should be learned and applied.
“These reforms will give the regulatory authorities much stronger powers to come down hard on abuse and to make irresponsible directors bear the consequences of their actions.”
Actions are already being taken by the government to provide stronger legal protections to smaller firms who can often lose out on significant sums of money when larger companies become insolvent.
Existing insolvency laws allow for directors to be disqualified for up to 15 years if their conduct is deemed to make them unfit to manage a business.
The Insolvency Service disqualifies roughly 1,200 “irresponsible directors” each year across the UK.