Insolvency expert welcomes 'rogue directors clampdown'

Paul Barber, partner at Begbies Traynor in Preston and chair of the restructuring trade body R3, says new government plans to curb rogue directors will help save jobs.

The proposals aim to stop directors dissolving companies to avoid paying workers or pensions, and will also give struggling companies more time to rescue the business and help safeguard jobs.

Paul said: "We welcome the government’s long-awaited announcement that it is moving forward with its corporate insolvency reforms. As the UK's exit from the EU approaches, ensuring that our insolvency and restructuring regime remains world class will be vital to UK plc’s success.“

The proposals would give the Insolvency Service new powers to ban or fine directors, and follow a number of recent controversies such as the collapse of BHS and Carillion.

Paul said: "R3 members have raised concerns for a long time that some directors are deliberately dissolving businesses to avoid paying their debts. The government’s announcement that it will look to disqualify such directors will be important in ensuring that directors are less likely to walk away from their responsibilities.

"However, R3 would also urge the government to consider how it can work with our profession and make better use of existing powers to tackle wrongdoing. Over the past few years, the number of directors disqualified annually has hovered around 1,200, yet R3’s members find that many cases of misbehaviour they report to the Insolvency Service are not followed up.

"We also want greater coordination between government bodies such as HMRC and the Insolvency Service to identify misconduct in a more timely fashion."

The proposals represent a success for R3’s campaign for a short business rescue moratorium. This would provide a 28-day ‘breathing space’ to allow businesses in distress to put in place a plan to deal with debts and try to avoid insolvency.

R3 has also welcomed plans for a new restructuring tool which it believes should help to rescue viable businesses and save jobs. However, Paul added: "A balance must be struck between ensuring directors are held to account, and giving distressed businesses the chance to be restructured. Measures that focus more on the former will only discourage entrepreneurship and damage the UK’s reputation as one of the most attractive places to do business."