Vince Cable plans 'rogue directors' crackdown
- 19 April 2014
- From the section UK
People convicted of commercial crimes overseas could be banned from running UK firms in a bid to tackle "rogue directors", Vince Cable has said.
The business secretary said dishonest directors could cause "huge" harm.
UK criminals can already be banned as directors, and Mr Cable wants the same for those committed overseas.
The Department for Business, Innovation and Skills (BIS) said the measures are due to be tabled in the Parliamentary session which ends in spring 2015.
They would mean "stronger deterrents" and "more robust sanctions" for the "rogue minority".
'Cooking the books'
It highlighted examples - many targeting older people - which had cost investors millions of pounds.
In one example people were encouraged to invest in a company which was "cooking the books" to hide the fact it was insolvent.
In another rogue practice, it said investors were encouraged to buy land which they were told would increase in value once planning permission was granted - only to find out this was never likely to happen.
BIS's proposals include allowing the government to ask courts to make rogue directors pay compensation to "put money back in the pockets of victims" - though the final decision would remain with the courts.
It also said judges should be required to consider a "wider range of matters" when deciding whether to disqualify someone from being a director.
These matters would include "previous business failures, the nature of any losses, overseas conduct and breaches of specific laws".
It added: "Overseas directors convicted of an offence relating to a commercial matter overseas could be barred from being a director in the UK."
People convicted of commercial offences - such as stealing company funds or involvement in fraudulent trading - in the UK can be disqualified as directors, and jailed for up to two years if they breach the disqualification.
'Down the drain'
About 1,200 directors are disqualified in the UK each year, for periods ranging from two to 15 years.
Mr Cable said the vast majority of directors "run their businesses in the right way" - but some people had "suffered unnecessary losses as a result of rogue behaviour".
"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," he said.
"Rogue directors can cause a huge amount of harm in terms of large financial losses, unnecessary redundancies and lifelong investments going down the drain."
According to BIS, the economy is saved around £100,000 for every director disqualified because of the "detrimental" effects their actions would otherwise have caused.
Christian May, from the Institute of Directors, told BBC Radio 5 live cases of rogue directors were "thankfully not very common at all".
The vast majority, he said, were "working hard, in the interests of their organisation".