The government has announced plans to give greater protection to creditors of insolvent businesses, including suppliers and staff.
It unveiled the launch of a consultation on 20 March to help improve the UK’s corporate governance framework, which it said will help ensure the highest standards of behaviour in those who lead and control companies in, or approaching, insolvency.
It said: “The vast majority of UK companies are run fairly and responsibly, but a small number of recent corporate governance failures have raised concerns that company directors can unfairly shield themselves from the effects of insolvency and - in the worst cases - profit from business failures while workers and small suppliers lose out.”
The government intends to raise standards by setting out proposals to crack down on directors and employers behaving irresponsibly. These include: clawing back money for creditors (including workers and small suppliers) by reversing inappropriate asset stripping of companies on the verge of insolvency, disqualifying and or holding directors personally liable and giving the Insolvency Service new powers to investigate directors of dissolved companies.
Business Secretary Greg Clark said: “These reforms will give the regulatory authorities much stronger powers to come down hard on abuse and to make irresponsible directors bear the consequences of their actions. [The government] will also seek views on new ways to protect payments to smaller firms in a supply chain which can be hit hardest when large companies become insolvent.”
The news follows last year’s corporate governance reforms which were intended to increase boardroom accountability and transparency of big businesses. The government has already appointed construction chief James Wates to chair a new group drawing up the UK’s first-ever set of corporate governance principles for large private companies.