‘Reckless’ directors could soon be made personally liable for their firm’s debts under new proposals set out by Business Secretary Vince Cable.
Cable says that along with making the people behind failed companies responsible for any outstanding debts owed, he also wants to disqualify them from being able to work at a firm in the same industry.
The business secretary revealed his controversial plans after the banking scandals which came to light, alongside several private company scandals; hoping to bring back public confidence in the system.
However, the tough call to action has not been met with approval from all; George Cowcher, Chief Executive of the Derbyshire and Nottinghamshire Chamber of Commerce has warned that the plans could “very seriously backfire” on the business secretary.
“The country is just beginning to claw its way out of recession and it is the private sector which is leading the growth,” he said.
“But entrepreneurs are going to do a double-take if laws are passed which hold them responsible for all their company’s debts if they fail. Many risk everything to set up businesses but there are protections in place at the moment to leave them with at least a roof over their heads if they get it wrong.”
Of course, necessary procedures and legislation must be in place to protect those at risk from the minority of directors and executives who will neglect to take responsibility for whatever kind of fall from grace their company may suffer.
But Mr Cable must be certain that he is not putting potentially harmful legislation in place which could dissuade the next generation of entrepreneurs from taking the risks which are often necessary for businesses to succeed.
Ensuring that your company has all the proper regulations in place, and seeking the advice of debt recovery specialists early on, are prevention techniques which could help you avoid getting caught out by these new controversial rules should they implemented.
Consultation on the legislation is currently on-going until 16 September.