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Govt crackdown to protect pensions when firms go bust

Queue-Wait-People-Lineup-Shadow-700x450.jpgThe government is pressing ahead with plans to safeguard pensions when a company goes bust with directors potentially facing being banned or fined.

Directors who dissolve their companies to avoid paying pensions could be subject to the penalties.

Under the new powers the Insolvency Service will be able to fine directors or have them disqualified.

In an Observer article in January, prime minister Theresa May pledged to crack down on highly paid executives who do not support workers’ pensions enough.

Under the new measures, the Investment Association will be asked to investigate to see if action is needed to make sure companies are giving their shareholders an annual vote on dividends.

The government is also making sure bosses explain to shareholders how the company can afford to pay dividends alongside financial commitments such as capital investments, workers’ rewards and pension schemes.

The measures, which will be set out in further detail in autumn, are part of the government’s response to March’s corporate governance and insolvency consultation.

IA chief executive Chris Cummings says: “There is a concern among investors that some companies are utilising interim dividend payments in order to avoid shareholder approval.”

He says: “This removes the ability of shareholders to properly scrutinise the payment of dividends and risks undermining the strength of the UK’s corporate governance framework, which has long been a model respected around the world.”

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