By Daniel Hunter
Business Secretary Vince Cable today (Monday) announced his intention to legislate for reforms to improve the transparency around company ownership and the accountability of company directors. His proposals come as the deadline to the ‘Trust and Transparency’ discussion paper draws to a close today.
The proposals look to promote growth by improving confidence in the UK as an open and trusted place to invest and do business. Vince Cable proposes to legislate as soon as the parliamentary timetable allows.
In particular, the measures seek to address concerns that too many rogue directors have got off in the past with minimal repercussions for their actions. The following changes in the law were proposed:
- strengthening the rules to give investors and those who are owed money the confidence that rogue directors will be banned from running companies
- helping those who are owed money get compensation where they have suffered loss from a director’s criminal or reckless behaviour
- ensuring that directors banned from running companies abroad cannot come to the UK to run British companies
- extending the investigation time granted for complex cases of director misconduct, to minimise any possible prosecutions being timed out
- raising standards of corporate behaviour by introducing special corporate behaviour training for banned directors who want to run a company again in the UK
“We need to see fairness and as well as trust in our director disqualification regime. For too long, a small rotten core has got away with either a slap on the wrist, a ban from working in their own industry or at the most, a time-limited ban," Business Secretary Vince Cable said.
“This neglects the fact that rogue directors’ decisions affect the lives of the employees they are responsible for and the businesses they deal with. That is why I will beef up the laws to ban rogue directors from running British companies so dodgy directors face the strongest possible consequences for their irresponsible actions.
“We will bring these changes in before the end of this Parliament so we can help restore some of the confidence that has been lost due to serious mistakes and failures by company bosses over the past few years.”
Government recognises that taking risks is an important part of business, and the failure of a company does not indicate misconduct on the part of the directors. However, at the same time there is a lack of confidence in the regime for dealing with directors’ misconduct through civil law (though where misconduct consists of criminal behaviour then criminal proceedings can be brought). The changes would not be retrospective for previous business failures.
The other part of the ‘Trust and Transparency’ discussion paper looks to inject greater transparency around who really owns and controls companies in the UK. This sets out how the UK will implement its G8 commitment to introduce a central registry of companies’ beneficial owners. It also proposes the abolition of bearer shares and corporate directors and measures to tackle misuse of nominee directors. These reforms would help to tackle tax evasion, money laundering and the financing of terrorism, and improve the investment climate in the UK.
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