Reckless company directors may have to compensate victims of their failed business dealings under new measures being brought forward by Vince Cable, the business secretary.
The Department for Business, Innovation and Skills said Cable was "taking aim at dodgy directors" by bringing in tougher penalties, with some of the worst offences recently seen in scam wine investment, landbanking and carbon credit schemes that targeted elderly people.
Under the new measures, there would be greater freedom for courts to ban those with fraud convictions overseas from setting up in Britain, which could have prevented the Italian businessman Massimo Cellino from becoming a director of Leeds United Football Club.
Courts would also have the power to force directors to compensate those who have lost out because of misconduct or serious failures in a business. The government would be able to intervene and request such action against a miscreant director but the final decision would be with a judge.
Judges in such cases would also have a duty to take past misdemeanours into account when deciding whether to disqualify a director, including previous business failures, the nature of any losses, overseas conduct and breaches of specific laws.
However, the government appears to have watered down its plans from original proposals to make sure directors were automatically disqualified after overseeing a certain number of failed businesses in a "three strikes and you're out" system.
The new measures are likely to be brought forward as draft legislation as part of the Queen's speech next month, which sets out the government's legislative programme for the next session of parliament.
"Some people have suffered unnecessary losses as a result of rogue behaviour," said Cable.
"These measures will protect the British economy and our reputation as a good and fair place to do business by banning directors who have already been convicted of offences overseas from running British companies.
"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."
The new measures were broadly welcomed by the Institute of Directors, which said: "The buck stops with the board, and the public rightly expects directors to maintain the highest standards."
Roger Barker, director of corporate governance at the business group, said: "Most directors take their role extremely seriously and will not be affected by the measures announced by the government today.
However, the growing extent of directors' responsibilities and potential liabilities highlights the need for proper induction and training for those that are assuming significant board roles."
Matthew Fell, director for competitive markets at the CBI, said: "These new rules will help ensure that the UK's world-leading company law regime continues to underpin its attractiveness as a place to do business.
"Tackling the damaging behaviour of a small minority of individuals will help to reinforce confidence in the majority of directors who run their businesses well and create jobs and growth throughout the UK."
The business department said the new laws could have stopped Cellino becoming a director of Leeds United after he won a battle for ownership of the club after successfully appealing against the Football League's decision to block his takeover.
Cellino initially failed the league's owners and directors test after being convicted of tax evasion last month in a Sardinian court, but the decision was overturned. He also has two fraud convictions, nearly 13 and 18 years old, which are considered spent in English law.
A spokesman for the business department said of the government's proposals: "Someone like Cellino would be unable to be a director of a company – regardless of the Football League."
The number of company director disqualifications in 2010 stood at 1,437 and fell to 1,151 in 2011 and 1,031 in 2012 before an increase to 1,053 in the first three quarters of 2013, figures from the department show.
theguardian.com
The Department for Business, Innovation and Skills said Cable was "taking aim at dodgy directors" by bringing in tougher penalties, with some of the worst offences recently seen in scam wine investment, landbanking and carbon credit schemes that targeted elderly people.
Under the new measures, there would be greater freedom for courts to ban those with fraud convictions overseas from setting up in Britain, which could have prevented the Italian businessman Massimo Cellino from becoming a director of Leeds United Football Club.
Courts would also have the power to force directors to compensate those who have lost out because of misconduct or serious failures in a business. The government would be able to intervene and request such action against a miscreant director but the final decision would be with a judge.
Judges in such cases would also have a duty to take past misdemeanours into account when deciding whether to disqualify a director, including previous business failures, the nature of any losses, overseas conduct and breaches of specific laws.
However, the government appears to have watered down its plans from original proposals to make sure directors were automatically disqualified after overseeing a certain number of failed businesses in a "three strikes and you're out" system.
The new measures are likely to be brought forward as draft legislation as part of the Queen's speech next month, which sets out the government's legislative programme for the next session of parliament.
"Some people have suffered unnecessary losses as a result of rogue behaviour," said Cable.
"These measures will protect the British economy and our reputation as a good and fair place to do business by banning directors who have already been convicted of offences overseas from running British companies.
"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."
The new measures were broadly welcomed by the Institute of Directors, which said: "The buck stops with the board, and the public rightly expects directors to maintain the highest standards."
Roger Barker, director of corporate governance at the business group, said: "Most directors take their role extremely seriously and will not be affected by the measures announced by the government today.
However, the growing extent of directors' responsibilities and potential liabilities highlights the need for proper induction and training for those that are assuming significant board roles."
Matthew Fell, director for competitive markets at the CBI, said: "These new rules will help ensure that the UK's world-leading company law regime continues to underpin its attractiveness as a place to do business.
"Tackling the damaging behaviour of a small minority of individuals will help to reinforce confidence in the majority of directors who run their businesses well and create jobs and growth throughout the UK."
The business department said the new laws could have stopped Cellino becoming a director of Leeds United after he won a battle for ownership of the club after successfully appealing against the Football League's decision to block his takeover.
Cellino initially failed the league's owners and directors test after being convicted of tax evasion last month in a Sardinian court, but the decision was overturned. He also has two fraud convictions, nearly 13 and 18 years old, which are considered spent in English law.
A spokesman for the business department said of the government's proposals: "Someone like Cellino would be unable to be a director of a company – regardless of the Football League."
The number of company director disqualifications in 2010 stood at 1,437 and fell to 1,151 in 2011 and 1,031 in 2012 before an increase to 1,053 in the first three quarters of 2013, figures from the department show.
theguardian.com
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