The proposed law would see changes to corporate law including a new central registry for owners of struggling companies. It would also enable City regulators to be able to extend bans to such industries as the financial services.

Eversheds’ corporate governance expert, Richard Lewis, slammed the proposed system ‘as akin to using a sledgehammer to crack a nut.’

He said it would add ‘a major compliance burden of the vast majority of companies whilst contributing relatively little to the knowledge of potential investors.’

Mr Lewis pointed out that the idea of giving the courts power to punish directors individually ‘will lack sufficient objectivity.’