New measures for 'errant' directors
The Government has unveiled new measures aimed at tackling "errant" company directors, including moves to make them pay compensation to creditors.
Business Secretary Vince Cable said some directors were operating in the "shadows", creating complex ownership structures which served to "deceive."
The minister published a number of proposals to address "opaque" company ownership structures and to improve the accountability of directors.
The plans include giving courts the power to make compensation awards against a director when making a disqualification order, and allowing liquidators to sell fraudulent trading actions to creditors.
Laws could also be changed to prevent disqualified overseas directors from being a director of a UK firm. Courts could also be allowed to take account of a director's actions on society, as well as previous failures, when considering disqualification.
Mr Cable also raised making ensuring the safety and stability of firms the main responsibility of bank directors - an idea suggested by the parliamentary commission on banking standards.
He told a London conference: "A stronger economy depends on investors, employees and the wider public having trust and confidence in companies and those that 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're now shining a light on who really owns and controls companies in the UK. We're also proposing tough measures to beef up the system for holding directors to account if they don't 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."
Matthew Fell, CBI director for competitive markets, said: "Any changes to switch directors' primary duty away from the shareholder would be a significant shift in company law, which could erode companies' investment appeal. We don't want to end up with a pick-and-mix approach to corporate governance standards for different sectors of the economy. This would also throw up lots of practical issues, for example what rules would apply to organisations which run banks as part of their larger group?"