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By Department for Business, Innovation & Skills
Measures to help improve corporate transparency and beef up director disqualification laws have been outlined with the publication of a discussion paper by the Business Secretary Vince Cable.
Speaking at the Responsible Capitalism conference, hosted by the think tank Reform, Dr Cable announced the launch of the Transparency and Trust paper. This sets out a number of proposals aimed at addressing opaque company ownership structures and improving the accountability of company directors. The proposed reforms seek to promote growth by improving confidence in the UK as an open and trusted place to invest and do business. Greater transparency and improved trust will mean honest entrepreneurs and investors can do business more securely in the UK and not be disadvantaged by those who don't play by the rules.
The first part of the paper looks to inject greater transparency around who really owns and controls companies in the UK. The paper sets out how the UK will implement its G8 commitment to a central registry of companies' beneficial owners. In addition it proposes the abolition of bearer shares and measures to tackle misuse of corporate directors and nominee directors.
These reforms would help to tackle tax evasion, money laundering and the financing of terrorism, and improve the investment climate in the UK.
The second half of the paper sets out ways of making directors more accountable for misconduct or company failure - including directors of banks. Key proposals include giving regulators greater powers to disqualify directors in specific sectors and allowing courts to take more account of the social impacts of directors' actions. The paper also asks whether disqualified directors should directly compensate creditors after a company collapses, be offered education before returning to such a position and whether disqualified foreign directors should be barred from holding a similar position in the UK.
Business Secretary Vince Cable said:
A stronger economy depends on investors, employees and the wider public having trust and confidence in companies and those that are running them.
The reality is that the vast majority of companies and directors contribute productively to the economy, abide by the rules and make an enormous contribution to society. However, it is also apparent that an errant few operate in the shadows, creating complex ownership structures which only serve to deceive.
With a strong commitment coming from the G8, we're now shining a light on who really owns and controls companies in the UK. Were also proposing tough measures to beef up the system for holding directors to account if they don't play by the rules or take their responsibilities seriously. This will mean honest, hard-working directors are not disadvantaged and will give the public greater confidence that irresponsible directors will face consequences for their actions.'
The main elements of the Otransparency section of the paper include:
The main elements of the Otrust' section of the paper include:
Further issues within the paper aimed at improving trust in the insolvency system include:
1. The OTrust and Transparency' discussion paper can be found here -
The consultation closes on 16th September.
2. The UK's Action Plan agreed at the G8 summit can be found here -
3. There are around 350 individuals who each hold more than 100 directorships in the UK, with cases of people holding up to 1,000.
4. Definition of all the terms in the above:
5. Pre-packs are defined as an administration where the assets are sold before an administrator is appointed. Concerns have been raised in the past that pre-packs are not transparent, that assets may be sold at below value, especially to a previous owner or connected party, with no open market valuation.
6. There were 728 pre-packs during 2012, representing 29% of all administrations.
7. The number of company director disqualifications were 1151 in 2011/12,1437 in 2010/11 and 1388 in 2009/10.
8. The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. It may also use powers under the Companies Act 1985 to conduct confidential fact-finding investigations into the activities of live limited companies in the UK. In addition the agency authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice.
9. The governments economic policy objective is to achieve strong, sustainable and balanced growth that is more evenly shared across the country and between industries. It set four ambitions in the Plan for Growth' https://www.gov.uk/government/publications/plan-for-growth--5 , published at Budget 2011:
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.
Department for Business, Innovation & Skills 7th Floor, 1 Victoria Street, London SW1H 0ET
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