Company executives will be liable to shareholders for civil damages if they are negligent, under a government Bill published today.
The Company Law Reform Bill is chiefly designed to cut through red tape, simplify legislation and save British business up to £250m a year.
When the new law comes into force, directors will have a duty to act not just in the interests of shareholders but in the interest of employees, suppliers, consumers and the environment.
The Bill also contains a new offence of ‘recklessly or knowingly including misleading, false or deceptive matters in an audit report’.
Trade and industry secretary, Alan Johnson, said: “An effective framework of company law and corporate governance will promote enterprise and help stimulate investment in the UK.”
Miles Templeman, director general of the Institute of Directors said it supported the concept of civil litigation against directors by shareholders.
“Shareholders who suffer from the negligent actions of executives should have the right to pursue the individual for compensation,” he said.
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