Downing Street has confirmed that its new communications chief will lose his consultancy company shares before starting in the job.

David Hill came in for criticism over a possible conflict of interest just two days after it was announced he would be succeeding Alastair Campbell.

Newspaper reports on Sunday revealed that Hill owns around 95,000 share options in the lobbying and public relations firm he is currently employed by.

The Sunday Times claimed he would be unable to cash in the options in Chime Communications for several years, despite the company representing controversial firms that may have compromised his work at Number 10.

Chime's clients include the GM food company Monsanto, who have been pressing for licences to plant bio-crops in Britain during a government review set to be concluded this autumn.

However, a Downing Street spokesman said that the options would automatically lapse when he left the company.

"David Hill has been in touch with Chime Communications who have made it clear that his share options lapse as soon as they receive his letter of resignation," he said.

It was thought possible taxpayers would have to fund a "golden hello" for the former Labour Party press chief in order to compensate him for surrendering the shares.

On Saturday night Downing Street insisted Hill would comply fully with the rules governing conflicts of interests laid down in Civil Service Management Code and the special advisers' standard contract.

"David Hill will be employed in accordance with the rigorous rules governing the employment of special advisers, including those in relation to any potential conflict of interests," a spokesman said.

"Of course David will ensure that he fully complies."

Liberal Democrat Treasury spokesman Matthew Taylor said that the reports underlined the case for putting a civil servant in charge of government communications rather than a political appointee.

"The public has had enough of spin and sleaze," he said.

"The prime minister really wants to change things he must put a civil servant in charge of communications.

"Government should put the public interest first, not that of the Labour Party or other commercial interests.

"Inevitably only a civil servant will be seen as genuinely independent and reliable."