Partner Article

Stronger sanctions against fraudulent company directors are welcome

The Government have promised tougher sanctions against negligent, fraudulent or reckless compay directors.

Individual regulators from specific industries could also be given the power to disqualify directors in their respective sectors, while directors’ actions could eventually be judged against a wider set of criteria by Insolvency Practitioners investigating negligent or fraudulent behaviour. R3 has been calling for more resources to be directed into this area for some time, to ensure that the number of disqualifications can keep pace with the number of reports that Insolvency Practitioners submit on the conduct of a director in an insolvent business. Streamlining the reporting process could also improve disqualification rates. A widening of the criteria for recommending a director’s disqualification is good news, and it is encouraging to see that BIS is proposing to allow other regulators to disqualify directors too, which would share the workload and speed up due process. And as well as supporting the tougher stance on fraudulent bosses, Steve Ross is also welcoming BIS’s strengthened focus on improving director training.

We obviously need to recognise that directors can and do make mistakes but that, in many cases, this is more about naivety and inexperience than deliberate wrongdoing. Introducing a programme of education for disqualified directors, after the completion of which such individuals should be given the chance to re-enter the business world is entirely appropriate, and it is encouraging to see BIS providing for this in its proposals. It is important that the UK insolvency regime does not have a negative impact on business creation.

This was posted in Bdaily's Members' News section by Steve Ross .