Tougher penalties for “reckless” directors in the UK could be on the cards after politicians mounted a two-pronged attack on unacceptable business practices.

On 8 July, the UK Government announced that it would be implementing the majority of recommendations that were made by the Parliamentary Commission on Banking Standards (PCBS), amending where necessary the Banking Reform Bill currently going through Parliament.
Just a week later, business secretary Vince Cable unveiled proposals for making company directors more accountable, and
for greater transparency on company ownership.
The PCBS recommendations included:

• A new criminal offence for “senior persons” of reckless misconduct in the management of a bank, carrying a custodial sentence;
• A new remuneration code better to align risks taken and rewards received; and
• A new power for the regulator to claw back bonuses and pension rights for senior bank employees, in the event of their banks needing taxpayer support.

PCBS chairman Andrew Tyrie MP said: “Where the standards of individuals, especially those in senior roles, have fallen short, clear lines of accountability and enforceable sanctions are needed. They have both been lacking.”
In its response to the PCBS report, the Government also called on the International Accounting Standards Board to prioritise the development of a new accounting standard on financial instruments. It also said there should be better dialogue between bank auditors, regulators and tax authorities.
Vince Cable’s proposals, made in a speech to the London Stock Exchange, contained plans to inject greater transparency into who owns and controls companies in the UK, including setting up a central registry of companies’ beneficial owners. “Bearer shares”, which allow the true owners to remain anonymous, would be abolished.
The reforms also set out to enhance accountability, with greater powers to disqualify reckless or incompetent directors. Specifically:

• Courts considering disqualification would be able to take into account whether “wider society” has been harmed by a director’s actions;
• The time limit for launching disqualification proceedings would be extended from two to five years; and
• Courts would have the power to make compensation awards against a director as part of a disqualification order.

Cable also announced a review of “pre-pack” administrations – where a deal for the sale of a company is concluded before formal insolvency procedures begin – to be led by former Baker Tilly partner Teresa Graham CBE. Around 29 per cent of administrations in 2012 followed this model. Last year the Government dropped plans for tighter controls on pre-packs.