Business Secretary Vince Cable has announced new measures to tackle rogue directors and improve business transparency.
A series of new proposals, set to be tabled in the Parliamentary session ending in spring 2015, include the ability to disqualify people convicted of commercial crimes abroad from operating UK firms.
Cable said: “The vast majority of directors in this country run their businesses in the right way. But some people have suffered unnecessary losses as a result of rogue behaviour.
“These measures will protect the British economy and our reputation as a good and fair place to do business by banning directors who have already been convicted of offences overseas from running British companies.
“Rogue directors can cause a huge amount of harm in terms of large financial losses, unnecessary redundancies and lifelong investments going down the drain. It is only right that we should put the toughest possible sanctions in place, make sure we stamp out unfair practices and deter those who are looking to act dishonestly.”
Other proposals include allowing the government to intervene and ask courts to award compensation against a disqualified director in order to put money back in the pockets of victims, and changing disqualification law so judges have a duty to take into account a wider range of matters when considering whether to disqualify an individual, such as their previous business failures, the nature of any losses, overseas conduct and breaches of specific laws.
Figures from the Insolvency Service show 1,200 directors are disqualified annually, with 1,053 disqualified in the 10 months to January 2014.
The Trust & Transparency consultation paper, initially launched in July 2013, has also targeted the opacity of corporate ownership and directorship, and proposes the launch of a central registry of company-beneficial ownership information.
Giles Frampton, vice-president of insolvency trade body R3, said of the proposals: “We’re very pleased to see action from the government in such an important area. R3 has been calling for improvements to the disqualification process for some years now, and it’s good to see government has been listening.
“It is encouraging that the government has made director disqualification such a priority.
“However, while the government’s proposals may help improve performance on disqualification, there is still more work to do before reality matches rhetoric. More investment in the Insolvency Service is needed, as is reform of how rogue directors are reported.
“Director disqualification is currently an area of real concern for creditors and the insolvency profession.”