Directors that establish phoenix companies to avoid paying workers or pensions could face “hefty” fines or disqualification, the government has announced.
Business minister Kelly Tolhurst said the Insolvency Service would be given new powers to punish those cases where companies have been dissolved to avoid paying debts to creditors, staff and pensions.
Ms Tolhurst said: “Some recent large-scale business failures have shown that a minority of directors are recklessly profiting from dissolved companies. This can’t continue.
“That is why we are upgrading our corporate governance to give new powers to authorities to investigate and hold responsible directors who attempt to shy away from their responsibilities.”
The action on phoenix companies is part of a raft of measures relating to corporate governance and insolvency published in response to a consultation conducted earlier this year.
These include new measures to giving struggling companies more time to rescue their business through restructuring plans.
The government said it planned to improve the quality of directors’ work by establishing a code of conduct and introducing training to make directors aware of their legal responsibilities.
Dividend payment practices will also be targeted, with new rules forcing bosses to explain to shareholders how a company can afford dividends alongside other financial commitments such as capital investments, workers’ rewards and pension schemes.
The government will also ask investment manager trade body the Investment Association to look at whether companies are giving shareholders their annual vote on dividends.