The Government will introduce new powers to give greater protection to staff and small suppliers in insolvent businesses, an official report has shown.
The consultation paper launched this month will look at improving corporate governance and ensuring the “highest standards” of behaviour in those who lead and control companies in, or approaching, insolvency.
The announcement follows several instances where corporate governance failures have raised concerns that company directors can “unfairly” shield themselves from the effects of insolvency.
The Government says that, in some case, the rules can actually allow company directors to profit from business failures while workers and small suppliers lose out.
The law will be changed so that company directors and employer behave responsibility during insolvency proceedings. These changes include:

• clawing back money for creditors including workers and small suppliers by reversing inappropriate asset stripping of companies on the verge of insolvency
• disqualifying and or holding directors personally liable when found to have sold a struggling company or subsidiary recklessly or knowing it would fail
• giving the Insolvency Service new powers to investigate directors of dissolved companies
• consideration of the legal and technical framework within which decisions are made on payment of dividends, and how it could be improved and made more transparent
• strengthening the role and responsibilities of shareholders in stewarding the companies in which they have investments.

Business Secretary Greg Clark said: “Britain has a good reputation internationally for being a dependable place to do business, based on required high standards. This framework has been regularly upgraded and in the light of some recent corporate failures I believe the lessons should be learned and applied.
“These reforms will give the regulatory authorities much stronger powers to come down hard on abuse and to make irresponsible directors bear the consequences of their actions.”