May 23, 2014

Tougher penalties against reckless directors planned

With around 1,200 directors disqualified each year, the government is determined to make sure those who flout their responsibilities, cost jobs and cause investors to lose their money face the strongest possible consequences.

The measures include:

  • allowing government to intervene and ask the court to award compensation against a disqualified director to put money back in the pockets of victims. This would put them in a better position to get compensation if they are victims of a miscreant director
  • changing disqualification law so judges now have a duty to take into account a wider range of matters when considering whether to disqualify an individual, such as their 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

Business Secretary Vince 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.”

Directors can currently be disqualified for abusing the corporate and insolvency regimes or for treating creditors unfairly. Analysis suggests that for every director disqualified, the economy is saved around £100,000 because of the detrimental action that their actions could have caused if they had not been disqualified.

Legislation will be required for these reforms.

At Royds, our experts can advise individuals on matters where directors have been disqualified for abuse of corporate and insolvency regimes resulting in employee redundancies.

For more information, please visit or contact Stewart Wilkinson, Ashok Patel, Chris Rodda or David Bowman.

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