Directors who have dissolved companies to avoid paying workers or pensions could be disqualified or fined by authorities for the first time. The move is part of a government initiative to safeguard workers, pensions and small suppliers when a company goes bust.
The Observer reported in January that the government was preparing to crack down on irresponsible company bosses in the wake of the collapse of Carillion. The construction and outsourcing giant went into liquidation with a deficit in its pension scheme of £900m.
Other major company collapses that have forced the government to action include the demise in 2016 of the BHS chain formerly owned by Sir Philip Green which had a pensions deficit of more than £500m.
Theresa May said then that while governments should not get involved in day-to-day management of businesses, the state should now act “in favour of ordinary working people”.
The government has revealed details of how these measures – which will be set out in further detail in the autumn – will be implemented. Under the shake-up, bosses will face investigation if they try to escape paying a dissolved company’s debts to their own staff and creditors. The Insolvency Service will then be able to fine directors, or even have them disqualified, if they fall short of standards.
In addition, companies are to be given more time to rescue their businesses, either by restructuring or by seeking new investment. At the same time, shareholders will be given more powers to hold boardrooms to account.
The government will also announce measures to improve the quality of directors’ work by developing proposals to introduce better training to make them more aware of their legal duties, while the Investment Association will be given powers to ensure bosses cannot reward investors when firms are in financial distress.
“We are upgrading our corporate governance to give new powers to authorities to investigate and hold responsible directors who attempt to shy away from their responsibilities,” said business minister Kelly Tolhurst.
