‘Rogue’ directors face tougher penalties

Business Secretary Vince Cable has unveiled plans for tougher penalties against reckless company directors.

The UK has one of the strongest disqualification regimes in the world, with disqualification periods ranging from two years up to 15 years for the worst offenders, the new measures will introduce stronger deterrents to breaking the law and more robust sanctions when this occurs. Around 1,200 directors are disqualified each year.

The new measures unveiled on 19 April include:

  • allowing the government to ask the courts to award compensation against a disqualified director, to return money to those who have suffered through their behaviour
  • 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 previous business failures, the nature of any losses, overseas conduct and breaches of specific laws
  • overseas directors convicted of an offence relating to a commercial matter overseas could be barred from being a director in the UK.

Dr 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.

“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.”

New legislation will be required to introduce the reforms. At present, directors can be disqualified for breaching corporate and insolvency regimes or for treating creditors unfairly.

At Palmers, we can provide expert advice to directors on all aspects of compliance with company law, including directors’ duties. We can also assist when directors are facing the possibility of disqualification. For more information, please contact Andrew Skinner.