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IA calls on government to create body to 'punish negligent directors'

Calls for establishment of new single authority

IA: Government must establish body with power to issue sanctions against company directors who fail to meet their duties
IA: Government must establish body with power to issue sanctions against company directors who fail to meet their duties
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The Investment Association (IA) as called on the UK government to establish a new single authority with the power to "punish negligent directors".

In response to the Department for Business, Energy and Industrial Strategy's (BEIS) consultation on insolvency and corporate governance, the IA said such a body should be established with the power to issue sanctions against company directors who fail to meet their duties.

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The BEIS consultation was launched in March 2018, with the aim of collecting views on "improvements to corporate governance within companies which are in or are approaching insolvency".

Director of stewardship and corporate governance at the Andrew Ninian said "recent high profile examples" of directors failing in their duties "have clearly demonstrated that the current framework for sanctioning needs re-thinking".

He added: "The current system of sanctions is fragmented between many different authorities, and often directors are only sanctioned as a result of investigations after a company goes into insolvency.

"By uniting the powers and responsibilities, we would be giving real teeth to a single body who could then hold any directors to account for being negligent of their duties."

"It is essential that directors of companies are held accountable and appropriately sanctioned when they negligently fail to meet their duties."

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The IA's Public Register has recorded 28 companies where 20% or more of shareholders have voted against a director resolution, including director re-election in the 2018 AGM season, the trade body said.

It added government should replace the "fragmented system of director sanctions", the IA said, with one single body, providing "better scrutiny over sanctioning for directors who are negligent in fulfilling their duties".

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