The Government has been urged to reform company law to protect workers' rights and stop venture capitalists stripping companies of their assets.
Following the recent closure or administration of several high-profile companies owned by private equity firms, including Little Chef, Gwyn Prosser, MP for Dover, tabled an Early Day Motion (EDM) last week calling for the reforms.
The EDM, which has already attracted nine MP signatories, calls for the Government to revise company law to prevent the exploitation of limited status and ensure that the interests of customers and employees are not undermined by the "greed" of venture capitalists.
Prosser is backed by the GMB union, which claims that more than 5,000 jobs have been lost through the demise of companies "asset-stripped" by venture capitalists.
Paul Maloney, GMB senior officer, demanded proper regulations for venture capitalists, including compulsory company registration with the DTI and Companies House, and curbs on tax relief when applied to speculation rather than renovation.
"Private equity is bad for industry and bad for the economy," he said. "They rob Peter to pay Paul and prey on the taxpayer while giving nothing back to the economy. They just walk off with wads of money in their back pockets, leaving the company and its workers suffering."
Permira, former owner of Travelodge and Little Chef and one of the companies criticised in the EDM, defended the private equity model.
"The issues being raised by the GMB only relate to a small part of the range of activities undertaken by private equity firms," a spokesman said.
"Permira has invested in more than 180 companies over the last 20 years, so there is a wealth of accumulated experience that can be used when companies need to change.
"Because of the way private equity firms work, they can effect and address change efficiently to restructure or grow businesses and have created far more jobs overall than losses."
By Emily Manson