Cable’s proposals to hold company directors to account could stifle enterprise
16 July 2013
Proposals in a discussion paper announced by business secretary Vince Cable to make company directors more accountable for misconduct or company failure could make it easier for directors of staffing companies to be disqualified.
Tue, 16 Jul 2013Proposals in a discussion paper announced by business secretary Vince Cable to make company directors more accountable for misconduct or company failure could make it easier for directors of staffing companies to be disqualified.
However, those working in and around the recruitment industry fear that if implemented they could stifle enterprise and initiative.
In a speech at the London Stock Exchange yesterday, Cable announced the launch of ‘Transparency and Trust’, a consultation document, which makes a number of proposals and asks for views from interested parties.
The main proposals, on company director disqualification, which Cable described in his speech as “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”, are:
• allowing the courts to take account of the impact a director’s actions have on society, as well as of their previous failures
• giving courts the power to make compensation awards against a director when making a disqualification order and allowing liquidators to sell or assign fraudulent trading actions to creditors
• extending the time limit for when disqualification action must be taken against the directors of an insolvent company from its current two years to five years
A Department for Business, Innovation & Skills spokesperson tells Recruiter that in the wake of failure of several of the UK’s largest banks, the proposals are “largely aimed at the finance sector”, but that they could apply to any sector, including the recruitment sector.
Andy Hogarth, chief executive officer of outsourcing and recruitment firm Staffline, who has taken a stand against travel & subsistence schemes that exploit low-paid workers, tells Recruiter that it is important that the government “gets the balance right between encouraging enterprise and stopping the abuse of a system, which some people manage to manipulate successfully.
“I really hope that it doesn’t stop people who are thinking about setting up a company and running their own business,” he says, adding: “We don’t want to stop enterprise and business from creating jobs and ultimately wealth for the country.”
Andy Wilks, partner in the commercial and litigation team at solicitors Francis Wilks and Jones, who has represented company directors facing disqualification action by the Insolvency Service and whose firm works in the recruitment sector, tells Recruiter the discussion paper “should make all directors sit up and take notice”.
“The distinction between genuine risk taking in business and ‘overstepping the mark’ will clearly narrow,” Wilks adds.
“No industry sector will be immune, including recruitment,” he says, and “this will increase the need for all directors to minute key decisions taken in their businesses to avoid facing claims later, either in terms of disqualification or repayment from disgruntled creditors”.
Wilks says he is not sure whether the proposals will lead to an increase in director disqualifications. Disqualifications could become the responsibility of the relevant trade sector bodies, rather than underfunded BIS, he suggests. “It depends on the body and whether they deem it a priority,” he adds.
As recruiter.co.uk reported yesterday, Cable’s speech also put the issue of pre-pack administrations (often referred to as ‘doing a phoenix’) very firmly on the agenda.
The paper announces a review into whether pre-pack administrations encourage growth and employment and provide value for creditors. The review will be carried out by Teresa Graham, chair of the Administrative Burden Advisory Board (ABAB), and will report back early next year.
ABAB supports HM Revenue & Customs (HMRC) to make it easier, quicker and cheaper for small and medium enterprises (SMEs) to deal with the tax system. The Advisory Board will monitor and assess HMRC’s progress against its commitments to improve SMEs’ customer experience.
However, those working in and around the recruitment industry fear that if implemented they could stifle enterprise and initiative.
In a speech at the London Stock Exchange yesterday, Cable announced the launch of ‘Transparency and Trust’, a consultation document, which makes a number of proposals and asks for views from interested parties.
The main proposals, on company director disqualification, which Cable described in his speech as “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”, are:
• allowing the courts to take account of the impact a director’s actions have on society, as well as of their previous failures
• giving courts the power to make compensation awards against a director when making a disqualification order and allowing liquidators to sell or assign fraudulent trading actions to creditors
• extending the time limit for when disqualification action must be taken against the directors of an insolvent company from its current two years to five years
A Department for Business, Innovation & Skills spokesperson tells Recruiter that in the wake of failure of several of the UK’s largest banks, the proposals are “largely aimed at the finance sector”, but that they could apply to any sector, including the recruitment sector.
Andy Hogarth, chief executive officer of outsourcing and recruitment firm Staffline, who has taken a stand against travel & subsistence schemes that exploit low-paid workers, tells Recruiter that it is important that the government “gets the balance right between encouraging enterprise and stopping the abuse of a system, which some people manage to manipulate successfully.
“I really hope that it doesn’t stop people who are thinking about setting up a company and running their own business,” he says, adding: “We don’t want to stop enterprise and business from creating jobs and ultimately wealth for the country.”
Andy Wilks, partner in the commercial and litigation team at solicitors Francis Wilks and Jones, who has represented company directors facing disqualification action by the Insolvency Service and whose firm works in the recruitment sector, tells Recruiter the discussion paper “should make all directors sit up and take notice”.
“The distinction between genuine risk taking in business and ‘overstepping the mark’ will clearly narrow,” Wilks adds.
“No industry sector will be immune, including recruitment,” he says, and “this will increase the need for all directors to minute key decisions taken in their businesses to avoid facing claims later, either in terms of disqualification or repayment from disgruntled creditors”.
Wilks says he is not sure whether the proposals will lead to an increase in director disqualifications. Disqualifications could become the responsibility of the relevant trade sector bodies, rather than underfunded BIS, he suggests. “It depends on the body and whether they deem it a priority,” he adds.
As recruiter.co.uk reported yesterday, Cable’s speech also put the issue of pre-pack administrations (often referred to as ‘doing a phoenix’) very firmly on the agenda.
The paper announces a review into whether pre-pack administrations encourage growth and employment and provide value for creditors. The review will be carried out by Teresa Graham, chair of the Administrative Burden Advisory Board (ABAB), and will report back early next year.
ABAB supports HM Revenue & Customs (HMRC) to make it easier, quicker and cheaper for small and medium enterprises (SMEs) to deal with the tax system. The Advisory Board will monitor and assess HMRC’s progress against its commitments to improve SMEs’ customer experience.
