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Appointing Director just to open a bank account

Appointing Director just to open a bank account

Is it common that a director with very poor credit rating to appoint a family member as  a director in order to open a bank account then resigns and replaces them as the new director of the company. Any issues you can forsee  ? 

Someone asked me the question today and didn't know

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22nd Jan 2018 20:10

The issues I can foresee is that the bank close the account when they see what has happened.

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22nd Jan 2018 20:53

I agree with John. Under the tighter KYC controls that banks are taking on there is a good chance that the account will be closed and the family member gets his copy book blotted. In the current risk averse climate I wouldn't rule out the possibility that the family member could have their own personal bank account closed as well if their bank is so minded.

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22nd Jan 2018 22:21

ok but how will the banks know unless they carry out the necessary checks on some sample and they were the unlucky ones picked out..

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to GlobalTax
22nd Jan 2018 22:52

They wouldn't.

And it's why banks are a bit useless in this respect (though companies themselves aren't any better).

I've been a director of a flat management company and three directors (myself included) set up a bank account. A few years later, all three directors have long gone (myself included) and new directors appointed. As far as I was aware no checks where made by the bank as directors left or where added. The account is still open.

"Aha!" I hear you cry, "They might have shut the account! You wouldn't know!" - I'm afraid I do. Because two years after leaving the flat and multiple house moves later, I happened to open a personal bank account with the same bank the flat management company had banked with......

Two weeks after opening the bank account, a notification arrived - new statement available online! Yes. It was the company bank statement, which I continued to received for THREE years on my PERSONAL online banking despite phone calls, emails and letters to the bank.

Banks - don't have a clue, and once the first check is done I doubt they'll ever look again.

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to thevaliant
23rd Jan 2018 11:59

Thanks for this. Someone else mentioned that any changes to directorships at companies house are instantly notified to the bank.

May I ask who did you bank with as some banks maybe more stringent than others. I know HSBC seem quite strict on KYC.

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23rd Jan 2018 11:29

I suppose I should add, that in my (limited) experience of these things, the banks don't really care as long as you are NOT overdrawn (or have the ability to).

In the example I mentioned, our flat management company didn't have an overdraft facility and never more than £2k in the bank.

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23rd Jan 2018 15:10

John and Tim identify a couple of short-term issues. But look a little bit ahead. Do you not see more looming? (Why is the director's personal credit rating relevant, after all?)

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By Matrix
23rd Jan 2018 15:50

One of my clients banks with Barclays and has many Director changes. Barclays only asks for KYC docs for new Directors when there is a mandate change, not at the time the new Director is added.

However I would leave the Director to address his bank account issues himself and determine how this information affects my own KYC checks. I assume if this is a new client that you will mark it high risk?

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By Matrix
to Matrix
23rd Jan 2018 17:07

Thinking about it, I don't think your suggestion would work since the new Director will need to be added as a signatory and will fail the KYC checks at this point, since this is a mandate change. I assume the intention is for the new Director to replace the original Director as signatory?

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to Matrix
23rd Jan 2018 17:24

Its his suggestion and think the intention for him to use his wife's login to operate the bank account. Its probably wrong in a number of ways but sure it happens on a regular occurrence.

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By Matrix
to GlobalTax
23rd Jan 2018 17:35

Who will be the shareholders?

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to Matrix
23rd Jan 2018 19:06

The Husband

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By Matrix
to GlobalTax
23rd Jan 2018 21:01

Ok well banks will need to do KYC checks on the beneficial owner in the same way as we do so you can tell him that this won't work.

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