BHS and Carillion failures prompt government crackdown on “dodging debts” directors
The government has promised to get tough on company directors in the wake of recent high-profile corporate failures.
In plans released today, the actions of firms facing insolvency will be put under the microscope with directors facing tougher sanctions such as fines and disqualification.
Workers and small suppliers are to be given more powers to claw back money owed to them in the event of corporate failure.
The changes come after a number of high-profile corporate failures – such as BHS and Carillion – have thrust the actions of directors prior to insolvencies into the limelight.
Retail tycoon Sir Philip Green has been criticised for his role in the 2016 failure of high-street stalwart BHS. MPs and regulators slammed his actions in relation to BHS’ pension scheme as well as selling the firm for just £1 in 2015.
Carillion, which failed in January, left thousands of smaller sub-contractors out of pocket and facing an uphill struggle to recoup losses. The company continued to take on huge new contracts throughout the second half of 2017 despite facing crippling contract write-downs.
Read more: Bosses “reckless” with pensions to face criminal punishment
Authorities will be given new powers to crack down on inappropriate asset stripping, dissolving companies to dodge debts and directors selling companies recklessly under changes to the UK’s corporate governance framework.
Directors will be held personally liable if they sold a business they knew would fail and the Insolvency Service will be given new powers to investigate directors.
Greedy and complacent
Frank Field, who as chair of the work and pensions committee is set to question business secretary Greg Clark on Wednesday over Carillion’s failure, said:
The lesson from BHS, Carillion and the two Philip Greens is that our whole system of corporate accountability ceases to operate over wide areas of British industry. The greedy and complacent can take a one-way bet with the livelihoods of their workers, their smaller suppliers and the taxpayer.
I welcome any move that holds individuals more accountable for their conduct, and strengthens the hand of the little guy as a result.
The changes come as the government yesterday issued a White Paper that could see bosses held criminally liable for mismanaging pension schemes.
“Britain has a good reputation internationally for being a dependable place to do business, based on required high standards. This framework has been regularly upgraded and in the light of some recent corporate failures I believe the lessons should be learned and applied,” said business secretary Greg Clark.
“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.”
Read more: Learning from Carillion? MP inquiries must shed more light than heat