Insolvency Gov correspondence

"Official Sensitive" - director disqualification ... what do I HAVE to do?

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One of my clients went into liquidation a few years ago, I dealt with the liquidators at the time as one would expect. Out of the blue, I've received an email from [email protected] entitled 'Official Sensitive'. The email says that they are investigating the director's conduct and considering whether director disqualification proceeds should be started. 

They list a hell of a lot of information that I 'need' to send them, under section 7(4) of the Company Directors Disqualification Act 1986. I've read it and Section 7(4) says that the 'Secretary of State or Official Receiver may require the liquidator, administrator or administrative receiver of a company to furnish  [any info or records] as the Secretary of State or Official receiver may reasonably require ...'

May recequire the liquidator, administrator or administrative receiver. I am none of those things, I'm just their accountant, they have a liquidator (it's still in progress). This is a fair bit of unbillable work, which it seems that I'm not actually required to do.

Would you:

1. Do what they say.

2. Email back with "we provided the liquidators with information we held at the time of their appointment". NB That information wouldn't quite answer all of their questions, but the liquidators should have filled in most (not all) of the missing gaps. There are some about my instructions & interaction with the company/directors/employees that only I can answer.

3. Something else?

It doesn't say anywhere in the email to the contrary, so presumably I can tell the individual, who is a director of other clients of mine?

I will be ringing the ACCA tomorrow, but wanted to hear from other's thoughts/experiences/opinions.

Replies (50)

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By David Ex
23rd Aug 2021 13:15

If the Ex-client went “into liquidation a few years ago”, what information do you still have? And, indeed, why would you retain anything? Were you required to?

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Replying to David Ex:
ALISK
By atleastisoundknowledgable...
23rd Aug 2021 13:49

Depends on one’s definition of the loose term ‘a few years ago’. I thought it was 2019, but just looked and it was 2020.

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By DKB-Sheffield
23rd Aug 2021 13:37

Hi

I had a issue a few years back (ex client considered for disqualification) but client was liquidated by the OR so slightly different. Any requests for information (from anywhere) were sent (by receipted delivery) to the OR.

Assuming you still have contact with the liquidator, it may be worth giving them a call as well as ACCA. Also, a quick response to your received email pointing out that you are not the liquidator etc., asking whether you are the intended recipient, and stating that you are happy to comply with any requests made by the liquidator etc. (surely) wouldn't cause harm... would it?

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Replying to DKB-Sheffield:
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By atleastisoundknowledgable...
23rd Aug 2021 13:51

Thanks. They’re not ‘my’ liquidators, I probably had a couple of emails from them at the time, but that is my entire history with them.

I was wondering whether people would think I was just been unreasonably awkward not immediately complying.

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Replying to atleastisoundknowledgable...:
paddle steamer
By DJKL
23rd Aug 2021 13:57

I certainly would not comply with an e mail before checking out the party sending same is who he/she says they are and asking for specific section references re legislation as to why your firm is required to furnish the requested information gratis.

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Replying to DJKL:
ALISK
By atleastisoundknowledgable...
23rd Aug 2021 14:40

i'm going to go with:

"Dear Mr Other,

I write in response to your below email.

Was this intended for me? I am not covered by section 7(4) of the Company Directors Disqualification Act 1986, a quick check at Companies House shows that the liquidators of the company are XXXXX, to whom I presume this was meant to be sent.

Yours,

ALISK"

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Replying to atleastisoundknowledgable...:
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By DKB-Sheffield
23rd Aug 2021 14:08

atleastisoundknowledgable... wrote:

I was wondering whether people would think I was just been unreasonably awkward not immediately complying.

That was why I suggested a quick follow up email to check that you are the intended recipient confirming you are not the liquidator etc. It may have come to you in error or, they may not be getting any joy from the liquidator.

Personally, I'd rather make some response - no matter how small and insignificant (i.e. not providing any information requested), rather than ignore a request from the IS. I'd see it more as putting my own mind at ease,
rather than only answering if I have a duty to do so.

Regarding the liquidator point, I understand this is not 'your' liquidator but, if they already have most of the information requested, reopening any historical lines of communication, and giving them a nudge, could save you hours of work!!!

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Replying to DKB-Sheffield:
ALISK
By atleastisoundknowledgable...
23rd Aug 2021 14:38

I was always going to respond, just wanted to make sure a 'small' response was considered reasonable (or at least, not unreasonable).

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Replying to atleastisoundknowledgable...:
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By DKB-Sheffield
23rd Aug 2021 15:14

I think your reply is fine. Polite, to the point, salient points covered, no 'extra' representations given that you may not be expected to give (or indeed may not be permitted to give as pointed out by David Winch below).

Regards

DKB

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David Winch
By David Winch
23rd Aug 2021 15:02

I would think that in the circumstances you would need permission from the company to disclose information - and that permission would come from the director(s) if still in post, or the liquidators.
However I see no problem with your suggested reply.
David
P.S. the position would be very different if you were being served with a production order under s345 PoCA 2002.

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Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
23rd Aug 2021 15:15

FYI

If the email was intended for you , and you send the draft reply above, I would expect you to receive a subsequent response demanding cooperation under S234-236 IA86 instead.

https://www.legislation.gov.uk/ukpga/1986/45/section/234

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Replying to Insolvency Practitioner:
ALISK
By atleastisoundknowledgable...
23rd Aug 2021 15:25

If I’ve read that legislation correctly, the SoS or IS can’t use that, only the liquidator.

Does ‘the court’ in that legislation literally mean they have to go to court to get a warrant/notice etc?

I’m not particularly trying to play hardball, just don’t want to spend a couple of hours collating / preparing information which might be used to get a client in trouble (I’m not passing comment either way, just don’t particularly want my name to be used as the person giving IS the stick to beat my client).

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Replying to atleastisoundknowledgable...:
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By Hugo Fair
23rd Aug 2021 15:39

Aah, so your main motivation is not to avoid unnecessary/unbillable work ... it's to protect your relationship with an individual who is still your client (inasmuch as he is a Director of other client companies)?
That puts a (subtly) different complexion on things, which in your shoes I'd make sure to highlight when talking to the ACCA.

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Replying to Hugo Fair:
ALISK
By atleastisoundknowledgable...
23rd Aug 2021 15:48

That's a fair point and I think marginally the driver, (surely it would be uncommercial of me to not at least consider it?) although TBF I'd still rather not go to the hassle of providing what's requested.

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By I'msorryIhaven'taclue
23rd Aug 2021 16:00

atleastisoundknowledgable... wrote:

They list a hell of a lot of information that I 'need' to send them, under section 7(4) of the Company Directors Disqualification Act 1986. I've read it and Section 7(4) says that the 'Secretary of State or Official Receiver may require the liquidator, administrator or administrative receiver of a company to furnish  [any info or records] as the Secretary of State or Official receiver may reasonably require ...'

Bad news - I believe that original wording may have changed a while ago, with the passing of the Small Business, Enterprise and Employment Act.

Here's a copy of a Keeling Schedule for the Bill:

https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

As you can see, the old s7.4 wording has been struck through, and replaced by the proposed wording "any person" (So that "The Secretary of State or the official receiver may require any person..." (a) to furnish him with such information with respect to that person's or another person's conduct as a director... and so on."

I assume this copy is the Bill that was enacted.

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Replying to I'msorryIhaven'taclue:
paddle steamer
By DJKL
23rd Aug 2021 16:16

Looks that way, here is updated wording post 2015.

(4)The Secretary of State or the official receiver may require [F6any person] —
(a)to furnish him with such information with respect to [F7that person's or another person's conduct as a director of a company which has at any time become insolvent (whether while the person was a director or subsequently), and]
(b)to produce and permit inspection of such books, papers and other records [F8as are considered by the Secretary of State or (as the case may be) the official receiver to be relevant to that person's or another person's conduct as such a director],as the Secretary of State or the official receiver may reasonably require for the purpose of determining whether to exercise, or of exercising, any function of his under this section.

https://www.legislation.gov.uk/ukpga/1986/46/section/7

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Replying to I'msorryIhaven'taclue:
David Winch
By David Winch
23rd Aug 2021 16:18

Agreed.
https://www.legislation.gov.uk/ukpga/1986/46/section/7
So OP's original draft reply is (on second thoughts) not appropriate (sadly!).
David
[DJKL beat me to it!]

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Replying to davidwinch:
ALISK
By atleastisoundknowledgable...
23rd Aug 2021 16:28

grrr

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Replying to atleastisoundknowledgable...:
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By I'msorryIhaven'taclue
23rd Aug 2021 16:48

Plan B: Invite your client to cover the cost of your providing the information to the Secretary of State directly for this potentially damaging, if not ruinous, matter; thereby eliminating nasty-pasty liquidators from the chain. And hope he doesn't twig the Act's amendments.

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Replying to I'msorryIhaven'taclue:
ALISK
By atleastisoundknowledgable...
23rd Aug 2021 17:13

Ooooh, I like it ;)

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Replying to I'msorryIhaven'taclue:
Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
24th Aug 2021 10:13

Take care as something is nagging the back of my mind that the request and investigation is confidential and you are not supposed to disclose it with the directors.

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Replying to Insolvency Practitioner:
ALISK
By atleastisoundknowledgable...
24th Aug 2021 10:27

I know, it’s doesn’t say it anywhere, but I have that same feeling.

Anyway, I’ve asked ACCA that question along with my obligations.

Fed up of companies blaming a covid for poor service. As if we could get away with that. All ACCA member helplines are shut, the computer says use an email address then terminates the call. Email auto response says 3 day turnaround. Not good enough. How many different ways are there to have staff answer the phone at home? I managed it within 1 day for effs sake, they’ve had 18 months.

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Replying to Insolvency Practitioner:
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By I'msorryIhaven'taclue
24th Aug 2021 14:29

Insolvency Practitioner wrote:

Take care as something is nagging the back of my mind that the request and investigation is confidential and you are not supposed to disclose it with the directors.

Eeeek!

Plan C, then: "furnish" the Secretary of State and/or official receiver with whatever information you have by bundling it all up and letting their side pick the bones from it - invite them to answer their own questions and draw their own conclusions.

Incidentally, IP, I didn't of course mean you when I referred to nasty-pasty liquidators.

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Replying to I'msorryIhaven'taclue:
Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
24th Aug 2021 14:37

I'm sure you didn't. I've been called all sorts of things, but 'nasty-pasty' is a new one!

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Replying to Insolvency Practitioner:
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By I'msorryIhaven'taclue
24th Aug 2021 14:47

Nevertheless, it was remiss and extremely unthinking of me.

To make amends, I shall promote you to Cornish pasty.

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Replying to I'msorryIhaven'taclue:
Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
24th Aug 2021 16:07

I shall update my CV straight away!

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Replying to Insolvency Practitioner:
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By Paul Crowley
25th Aug 2021 13:14

This suggests that the casual email really needs to be written in a much more professional way

I have enjoyed a few of your youtubes

And from what I see I know you would write a better email

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Replying to davidwinch:
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By Justin Bryant
23rd Aug 2021 18:05

S234-236 IA 1986 information requests/notices from IPs are fairly draconian (and accountants cannot usually get their costs for dealing with them). The IP can even demand LAP communications of the bust company, so arguably more so than under PACE etc.

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Replying to Justin Bryant:
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By I'msorryIhaven'taclue
23rd Aug 2021 22:23

I'm told there are a number of emerging financier companies who fund IPs on a case-by-case basis, underwriting the prosecution costs and disbursements against (allegedly) errant directors of busted companies who've walked off with the pot.

I've had a a potential wrongful trading action (yes, yes, I know how rarely they come to fruition) in my orbit for a decade or longer, and the client is so slippery he's still driving around in a £200k Lambo while the liquidators continue to mull it over. A commercial backer, of similar ilk to a purchaser of toxic debts or Lawyers4U (tripped over a pavement recently, and it was somebody else's fault?) might well be tempted, if only because his Wimbledon flat's worth £1m+

I suppose we can be thankful that it's only the Secretary of State - and not financed liquidators - who can put the likes of us on the hamster wheel F.O.C.

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Replying to I'msorryIhaven'taclue:
paddle steamer
By DJKL
24th Aug 2021 10:15

How do these work re ranking for payment, presumably the IP signs up during liquidation to the no win no pay deal and because any payment to the financier is not a debt of the insolvent party but a cost of the liquidation they rank before the mainstream creditors? They presumably also get a very large payout if successful.

If such a large payout was paid out then the creditors in the insolvency maybe in some cases do not get any recovery from this activity, would the IP not possibly be opening him/her self up to claims from the mainstream creditors in such a scenario?

As for pavement tripping lawyers, there is a special circle of hell for them (we have such an action against us/our insurers as I type).

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Replying to DJKL:
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By I'msorryIhaven'taclue
24th Aug 2021 14:41

I'm not sure of the financial mechanics, but I gather the idea is to target wealthy directors so that everyone's a winner (except, of course, the directors).

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Replying to I'msorryIhaven'taclue:
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By Justin Bryant
25th Aug 2021 12:03

Yes. See interesting recent big money tax debt example here: https://www.accountingweb.co.uk/any-answers/one-e-tax-ltd

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By bernard michael
24th Aug 2021 11:02

How many is "a few years ago" ??

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Replying to bernard michael:
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By bernard michael
24th Aug 2021 11:06

bernard michael wrote:

How many is "a few years ago" ??


Already answered I hadn't read to the end
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By The Innkeeper
25th Aug 2021 09:40

My initial concern would be is this genuine. I would do a quick call to a number found on the internet ( not from the e mail you received) . Otherwise I would agree with the others that your reply is ok

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B&W portrait
By MikeLee
25th Aug 2021 10:16

Just seen the comment regarding seeking permission for the director being investigated - DO NOT DO DO IT.

This may be regardded as tipping off and is a criminal offence, as I understand it.

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Replying to MikeLee:
David Winch
By David Winch
25th Aug 2021 12:25

I really cannot see a tipping off problem arising here. The OP has not made a Suspicious Activity Report (either internally to his MLRO or externally to the NCA) and there is nothing to suggest that a money laundering investigation is underway (the authorities are considering director's disqualification proceedings).
Furthermore, I cannot see how contacting the (former) client at this stage risks prejudicing an investigation into his prior conduct.
The OP has a duty of confidentiality to his (former) client and should not make disclosures to the authorities without first obtaining the permission of the (former) client, IMHO.
If in doubt, the OP should take (paid for) legal advice.
David

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Replying to davidwinch:
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By Paul Crowley
25th Aug 2021 13:22

The same old problem of legal advisors having legal privilages that other struggle to achieve
I agree
The former director may be a director of the company but contacts with director are not all for that insolvent company

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Replying to davidwinch:
Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
25th Aug 2021 13:52

Is the former client the Limited Company or the Director?

I strongly suggest OP does not discuss the Insolvency Service's investigation with the director.

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Replying to Insolvency Practitioner:
ALISK
By atleastisoundknowledgable...
25th Aug 2021 14:06

Insolvency Practitioner wrote:

Is the former client the Limited Company or the Director?

Client was the ltd co; the director doesn't submit TRs.

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Replying to atleastisoundknowledgable...:
Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
25th Aug 2021 14:16

That 's what I suspect - the Director was not the client.

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Replying to atleastisoundknowledgable...:
Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
25th Aug 2021 14:16

That 's what I suspected/was getting at - the Director was not the client.

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By Rgab1947
25th Aug 2021 13:17

No

This sounds like a scam.

Would want a phone number so I can check the office and want it in a formal letter.

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Replying to Rgab1947:
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By Paul Crowley
25th Aug 2021 13:24

I agree that recipient needs to ID the enquirer
But that always puts HMRC noses out of joint when they telephone me

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Replying to Rgab1947:
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By I'msorryIhaven'taclue
25th Aug 2021 13:29

That was my first thought. People financing liquidators, trying to data farm so as to evaluate prospective cases.

Similar to those letters that arrive at our office offering client companies quickie accounts for £299. Or the scam emails inviting us to pay our registration fee for the European Database of Data Controllers or some similarly useless publication.

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Melchett
By thestudyman
25th Aug 2021 13:42

Just to rule out any phishing, have you checked the headers of the email to confirm they have come from the actual insolvency government email address?

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ALISK
By atleastisoundknowledgable...
25th Aug 2021 14:20

***ACCA response*** (my words other than "")

You have to give capitulate, "accountants are treated as officers of the company in all respects other than Companies Act responsibilities" (?!?) I should email the IS to get clarification on the tipping off point, don't need permission from anyone as a legal requirement.

I was asked whether it was an audit client (it wasn't), not sure what different that would have made ...

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Replying to atleastisoundknowledgable...:
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By I'msorryIhaven'taclue
25th Aug 2021 16:28

So the legal requirement overrides the GDPR and allows you to share client company data (and presumably, for that matter, the director's personal data), without seeking permissions.

In the light of which, I can see how seeking an unnecessary permission might be construed as tipping off.

This change of the Act's wording could have major ramifications for all practitioners, especially those with client-companies whose directors have chowed through BBLs and are about to teeter. I guess all those who've announced their retirement in recent months could be making an unexpected comeback. Pro bono, to boot!

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David Ross
By davidross
26th Aug 2021 12:05

Slightly different circumstances from a few years ago, but concerning. Company client had to close immediately after being stiffed by a customer for £80,000. The Official Receiver agreed that this was the responsible thing to do and closed the matter. We understand they call it internally a 'dead box' case and I believe that they destroyed the records.

Some years later (just before the 6 year limit) a firm of ambulance chasing lawyers who claim to 'pierce the corporate veil on behalf of creditors' took the matter up "on behalf of the OR". I surmise that they had schmoozed the new head of the local office at a cocktail party. They accused the directors of having wrongly taken dividends "because they should have been aware of the Lehman Brothers case" - despite that fact that dividends were paid out of profits and the Balance Sheet was positive until the customer did a pre-pack administration. By threatening expensive legal action they blagged £25,000 out of our clients. I doubt if anything went to the creditors after their fees were paid.

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Replying to davidross:
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By Justin Bryant
26th Aug 2021 12:32

Yes. You used to be able to solve this by having (shell) corporate directors, but UK Ltds can no longer do that. You could perhaps run an IoM company in the UK with corporate directors and be OK re such ambulance chasers (in the absence of fraud or sham, you cannot "pierce" two layers under IA 1986 to get at the ultimate human controllers, although you need to watch shadow/de facto director risk).

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