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5-12-2016

The regulation and enforcement of company formation have come under the spotlight following a Reuters investigation which discovered that more than 400 people in and around a single town in the North East, had been or still were being paid to serve as directors for more than 1,000 shell companies.

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Reports have indicated that people in the town were paid £50 in cash to become directors, with a further £150 a year for forwarding company mail. In doing so, they provided a range of online businesses with a UK address to meet requirements to trade in Europe.

Frances Coulson, head of insolvency and litigation at Moon Beever and a trustee director of the Fraud Advisory Panel, was interviewed by Reuters and also on BBC Radio Newcastle (link here at 28:30 mins) and BBC Radio Five Live about what is described as a grey area of the law.

She said the story highlighted flaws in the regulation and enforcement of company formation in Britain. “Part of the raison d’etre for the enforcement is the protection of the public,” she said, adding that this “doesn’t sound as if it’s happening”.

While not commenting on the specific case, she said she had seen cases where people either did not know they were a director or had been paid a small amount of money to put their name forward. She had even seen cases where people felt flattered to be asked.

She added that it is extremely easy to become a director if you are over 16 but people needed to understand there are associated statutory duties. “As a director, things the company does are being done on your watch which can mean that you are personally liable,” she explained. “The risk factors are potentially very high. In the worst extreme, you could end up losing your house.”

This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained

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