The rise of Limited Company fraud

Fraud accounts for 41% of all crime in England and Wales, but only 1% of law enforcement resources are dedicated to tackling it.  It is therefore little wonder that criminals are targeting this ever lucrative market when there is little chance of being caught.

One pernicious form of fraud involves the registration of limited companies at Companies House, set up only for criminal enterprise.  Currently, no identification checks are made when setting up a company, which upon payment of £12, is usually registered within 24 hours.  Some may receive a letter from Companies House confirming they have been registered as a director of a company they have never heard of, others may not find out until bailiffs are knocking on the door.   Some may be registered as shareholders, as well as directors of the company.

What should you do?

Any instances of Fraud should be reported to the police and/or action fraud as soon as they are discovered.  If and while the police are investigating, you can take steps to remove your name from having any involvement with the limited company.  Companies House can remove you as a director of a limited company upon you notifying them you have been registered fraudulently.  As long as the limited company does not raise an objection (which is unlikely bearing in mind the reason it was set up), Companies House should remove you as a director.

Removing yourself as a shareholder is a far more complex task, which currently involves an Application to obtain a Court Order while will allow Companies House to correct the record.  You should seek specialist advice from solicitors on assistance in pursuing this option.

Practically, if you have unfriendly visit from a debt collector, bailiff or any other individual pursuing a debt owed by the limited company, then you have some comfort of knowing that you cannot be pursued personally as any debt of the limited company cannot be pursued from you.  Of course, you should still take steps to remove yourself from being linked to the company as registered directors have duties and obligations in law.  You may have been registered fraudulently, but if you do not take steps once on notice, others may seek to make you liable for the crimes of others.

Long term solutions…

Ultimately, while Companies House does not have the authority or resourcing to complete basic ID checks and funding is not put into tackling this form (and other forms) of fraud, the issue will continue and it will remain incumbent on individuals to be vigilant and take active steps themselves.  At a recent meeting of the Business, energy and industrial strategy committee, Companies House was described as “dysfunctional” and helping to facilitate fraud.  Systemic change is required, but who knows how long we will have to wait for that.

If you have been a victim of this type of fraud, our specialist Commercial Litigation team have experience in this area and are ready to assist you. Contact us today for further details.