New crackdown on reckless directors in UK
Directors who dissolve companies to avoid paying workers or pensions could face hefty fines or be disqualified from running a business for the first time.
The government is to press ahead with new plans to safeguard workers, pensions and small suppliers when a company goes bust.
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.
While the vast majority of UK companies are run responsibly, there are a minority of directors who deliberately dodge debts by dissolving companies then starting up a near identical business, with a new name. The practice is known as ‘phoenixing’ or ‘bumping companies’.
Under the new powers the Insolvency Service will be able to fine directors or even have them disqualified.
The Investment Association will be asked to investigate to see if action is needed to ensure that companies are giving their shareholders an annual vote on dividends.
The government is further raising standards by ensuring bosses explain to shareholders how the company can afford to pay dividends alongside financial commitments such as capital investments, workers’ rewards and pension schemes.
The government is also introducing new measures in response to its corporate insolvency consultation that will give financially-viable companies more time to rescue their business.
These measures, which will be set out in further detail in the autumn, are being put forward as part of the government’s response to the corporate governance and insolvency consultation, launched in March this year. ■