24 Oct 2014

Opinion: Piercing the Corporate Veil

Opinion: Piercing the Corporate Veil

Ritchie Whyte, Partner, comments on the recent disqualification of former Rangers owner Craig Whyte from acting as a Director.

Ritchie Whyte, Partner, comments on the recent disqualification of former Rangers owner Craig Whyte from acting as a Director.

The recent announcement by the Insolvency Service that it had handed out a fifteen year disqualification to former Rangers owner Craig Whyte from acting as a Director brings the keystone issues of director duties and corporate governance into sharp focus.  

The Insolvency Service accused Whyte of “failing to avoid conflict of interest in the running of the Club” and “preventing Rangers Football Club from being subject to proper corporate governance”.  

In handing out the maximum penalty to Whyte, the Insolvency Service have sent a clear message in what has been an extraordinarily high profile case. However, there is a growing school of thought that existing legislation does not do enough to penalise incompetent or unscrupulous directors.  

Vince Cable announced plans earlier this year to “target dodgy directors” and new tougher measures would make it easier for the Courts to prevent people with previous fraud convictions from setting up in the UK and also see those directors who are guilty of the most serious misconduct liable to compensate those who have lost out.  

These types of issues are always under the magnifying glass during difficult economic times. However, it appears clear that there will be a move to further clamp down on this kind of behaviour in the future.  Too often, honest hard working businesses are left to carry the can when flawed companies fail.

That said, there is clearly a balance to be had with any future legislation between protecting genuine and earnest enterprise whilst also promoting a culture of transparency and accountability in the corporate world.    

Thankfully, in my experience, the vast majority of company directors are prudent and seek professional advice to ensure that they discharge their duties properly and have adequate corporate governance structures in place to protect themselves and the business.  There is no doubt that changes are afoot in this contentious area of law – so watch this space.  

Ritchie Whyte, Partner


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