Government plans crackdown on bosses of failing companies
The government has proposed a clampdown on bosses who run or control companies that run into insolvency after a series of high-profile corporate failures.
The crackdown follows the collapses of BHS and Carillion, both of which left pensioners out of pocket and cost many thousands of jobs. The government has been under pressure to respond to the scandals.
Measures announced by Business Secretary Greg Clark include:
- holding directors personally liable when they recklessly sell a failing company
- clawing back money for suppliers, workers and other creditors if “inappropriate asset stripping” takes place before insolvency
- giving the government’s Insolvency Service new powers to investigate directors of dissolved companies
Other proposed changes include reviewing how dividends are paid and increasing the responsibilities of shareholders for how companies are run.
Clark said: “In the light of some recent corporate failures I believe the lessons should be learned and applied. 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.”
BHS, the privately owned department store chain, collapsed in 2016 a year after Philip Green sold the business for £1 to Dominic Chappell, a former bankrupt with no retail experience. The failure cost 11,000 jobs and left a pension deficit of £571m.
After he was hauled before MPs, Green, who became a billionaire by paying himself huge dividends from his companies, agreed to pay £363m into the pension scheme. Chappell was found guilty in January of failing to hand over information about the pension scheme to the pensions regulator.
Carillion’s collapse in January focused renewed attention on governance at publicly owned companies. The outsourcer’s pension scheme has a deficit of almost £1bn, leaving 28,000 current and former employees facing a cut to their retirement funds.