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Unauthorized Share Transfer-

My client bought a majority share (71%) in a dormant limited company.

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My new client bought a majority share (71%) in a limited company, which is dormant since incorporation, on the __ April 2020, the purchase was fully paid.
Within __ days, on the __ of May, the seller in cohort with the second and only shareholder (his daughter) transferred without my client knowledge, the entirety of the shares initially sold, back to him, by using the Companies House authentication code in his and the company’s accountant possession.

There was, no meeting of shareholders/directors, therefore no minutes and no shares certificates were issued, no communication to my client was made at all.
When found out my client was surprised and unable to do any deal related to the company, and the seller, now in possession of 100% of the shares refuses to communicate and explain his action and motivation.

The company owns 100% of a branch registered in an EU country, which is trading and owns valuable physical assets worth hundreds of thousands of pounds.
The company’s director has not declared this branch in the other EU country either at Companies House or HMRC.
There are also misleading and missing information within the Companies House declarations submitted. To make things worse, the seller is also the only signatory at the EU branch. 

My client feels he is a victim of fraud and I have to agree, considering that the shares were sold at a 1000% premium! Any advice on the action my client should take would be greatly appreciated. (The seller is a prolific companies' founder in both countries, prosing to trade in real estate or high value assets,  just to dissolve them within +/- a 21 months without, mostly any trade.)
Yours truly,

Replies (46)

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By lionofludesch
21st Mar 2021 13:31

My advice would be to instruct a solicitor. Or call the peelers.

As so often is the advice on this forum, we're accountants, not lawyers.

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Replying to lionofludesch:
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By @fernando_london
21st Mar 2021 23:25

I agree with calling in the solicitor. However, the support of the forum will help me on how to present the case.
in my view the company's accountant who holds the authorization code for Companies House filling acting on behalf of the seller, as not prepared any documents of the shares sale and with less than a month changed back the PSC from my client (the buyer) to the seller, even though was quite aware that the transaction was fully paid.

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By memyself-eye
21st Mar 2021 13:51

How much did your client pay?

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Replying to memyself-eye:
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By @fernando_london
21st Mar 2021 14:09

1000% of the share price declared. The share value is irrelevant for the case.

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Replying to @fernando_london:
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By memyself-eye
21st Mar 2021 16:33

True, but I'm curious....

Sounds like your client is a fool. - and we know what happens with a fool and his money.

Anyhow, it's a legal, not an accountancy issue.

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Replying to @fernando_london:
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By lionofludesch
21st Mar 2021 16:47

-AT-fernando_london wrote:

1000% of the share price declared. The share value is irrelevant for the case.

Not entirely. If it's £10, I'd advise forgeting about it. If it's £10000, I'd recommend seeing that solicitor I mentioned.

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Replying to lionofludesch:
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By @fernando_london
21st Mar 2021 23:28

Thanks. It is in fact near 10K. And the assets value are worth the fight.

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Replying to @fernando_london:
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By paul.benny
21st Mar 2021 16:49

With respect, the amount paid *is* relevant. If it was £500, the costs may mean it's not worth trying to get it back. If it was £500,000, client (presumably) has other resources they can expend on seeking recovery and they may have some success.

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By @fernando_london
21st Mar 2021 14:11

Ingenuity, naivety is often expensive.

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By Paul Crowley
21st Mar 2021 14:33

Sounds like he has been knowingly defrauded.
But at the least he should engage the authorities of the relevant countries.
Police, tax, accountants regulator
But chances are all persons involved probably do not exist in the names being used and the bank account the money went to was closed the day the money arrived.

Companies house should get full details if this is a serial fraud

But chances are that the company owned nothing at all

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Replying to Paul Crowley:
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By @fernando_london
21st Mar 2021 23:49

Exactly what I think. He's young, but "old school" in what we mean by honour and respect. Companies House and HMRC do not know about the branch abroad yet. I/we intend to engage the authorities, so long I am able to gather enough evidence of misconduct, possibly fraud, with tax evasion on top. I found a series of bogus companies (pretending to be in posh trades) in the name of the seller and others, which were dissolved in less than 2 years of being incorporated.

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Replying to @fernando_london:
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By bernard michael
22nd Mar 2021 09:35

-AT-fernando_london wrote:

Exactly what I think. He's young, but "old school" in what we mean by honour and respect. Companies House and HMRC do not know about the branch abroad yet. I/we intend to engage the authorities, so long I am able to gather enough evidence of misconduct, possibly fraud, with tax evasion on top. I found a series of bogus companies (pretending to be in posh trades) in the name of the seller and others, which were dissolved in less than 2 years of being incorporated.

Not sure Cos House have to be informed of the foreign branch
Is the seller uk based ??

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Replying to @fernando_london:
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By bernard michael
22nd Mar 2021 09:39

-AT-fernando_london wrote:

Exactly what I think. He's young, but "old school" in what we mean by honour and respect. Companies House and HMRC do not know about the branch abroad yet. I/we intend to engage the authorities, so long I am able to gather enough evidence of misconduct, possibly fraud, with tax evasion on top. I found a series of bogus companies (pretending to be in posh trades) in the name of the seller and others, which were dissolved in less than 2 years of being incorporated.

Is the seller uk based ??

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Replying to bernard michael:
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By @fernando_london
22nd Mar 2021 16:20

Yes.

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By paul.benny
21st Mar 2021 16:40

What due diligence did your client carry out themselves or have others do on their behalf?

How was the purchase documented and who prepared that agreement?

If these things were lacking, client is a naive fool.

You say that the price was a 1000% premium. That's largely irrelevant if you are talking about the nominal or par value. More important is the price in relation to the underlying net assets.

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Replying to paul.benny:
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By @fernando_london
21st Mar 2021 16:47

£1.00 = 1 share.

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Replying to @fernando_london:
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By paul.benny
21st Mar 2021 16:54

So client paid £10 per share* for 71%. The missing information is the number of shares.

* unless you mean client paid £1/share for 10p shares

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Replying to paul.benny:
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By @fernando_london
21st Mar 2021 17:05

No, he paid £1.00 per share, Capital social is £1000.00 = 1,000 shares, which was £7810.00.

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Replying to @fernando_london:
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By Paul Crowley
21st Mar 2021 17:41

So
Incredibly cheap to buy 70% of a thing that owns a thing that owns assets worth £100s of thousands.

even if the spiel was true, he paid at most 5% of the true value?

Did your client believe such good fortune, or was he convinced by a story that the assets were frozen and he was the person that could somehow liberate all the profits tax free

This story makes your client look as if he were the crook taking advantage
Best suggest he goes to a solicitor as there is not really anything productive you can do

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Replying to Paul Crowley:
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By @fernando_london
21st Mar 2021 20:12

The case is developing as I am finding additional info about both. The first insight tells me the buyer (my client) has capital is young and naïve, the seller is a penniless "old fox" (I cannot find much about him on the web, typical of seasoned fraudsters). The client's intention was to have a foot in the UK, the branch abroad, with my client's capital, bought an insolvent company that owns a few real estate properties, so ultimately the UK company owns the real estate once is freed from debt. ... so far is my understanding! :)

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Replying to @fernando_london:
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By johnhemming
21st Mar 2021 20:35

-AT-fernando_london wrote:

bought an insolvent company that owns a few real estate properties, so ultimately the UK company owns the real estate once is freed from debt. ... so far is my understanding! :)

It is confusing as to whether the company is "dormant"or "insolvent".

In any way it sounds like a mess, but not that expensive a mess.

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Replying to johnhemming:
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By @fernando_london
21st Mar 2021 23:20

The company registered in England is dormant, the fully owned branch in the EU country is active, the third company owned by the latter is insolvent and is the one that owns the real estate ... tricky mess! :)

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Replying to @fernando_london:
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By paul.benny
22nd Mar 2021 07:36

The Companies Act defines 'dormant' as having no transactions which should be included in a company's accounting records. A branch of a company is not a separate entity to the company itself. Ergo an active branch means an active company; not dormant.

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Replying to paul.benny:
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By @fernando_london
22nd Mar 2021 16:22

Agree with that. Which leaves the Director/shareholder and the accountant who submitted the returns at fault.

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Replying to Paul Crowley:
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By @fernando_london
21st Mar 2021 20:16

The client seems to be a honest negotiator who lacked a good financial adviser beside him.

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Replying to @fernando_london:
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By johnhemming
21st Mar 2021 19:04

-AT-fernando_london wrote:

No, he paid £1.00 per share, Capital social is £1000.00 = 1,000 shares, which was £7810.00.

If your client has paid only about 8k then litigation is unlikely to be cost effective. It all sounds a bit complicated and in litigation complexity costs money.

There may be a chance of something this way, but I would not expect it to be cost effective.

If it is complicated the police will probably say it is a civil matter.

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Replying to johnhemming:
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By Paul Crowley
21st Mar 2021 19:29

That would be my guess

Once heard that police not interested in people who give money to others unless at least £10,000 and very clear and obvious fraud.

Conmen work on victim greed
This makes victim look like the conman as paying less than 10% of true claimed value

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Replying to paul.benny:
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By @fernando_london
21st Mar 2021 23:56

Little to none due diligence(one gets not what it pays for). Those docs are what I am trying to obtain from the company's accountant, whom apparently is neither chartered nor registered with a respected governing body (!). Is a AIA (whatever that is!). Agree with the naïve.

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By Calculatorboy
21st Mar 2021 19:59

Its not your problem , dont waste your time ,its a legal issue

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By Gone Sailing
21st Mar 2021 20:49

Doesn't a share transferor have to sign something for it to be legal?

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Replying to Gone Sailing:
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By lionofludesch
21st Mar 2021 20:54

Gone Sailing wrote:

Doesn't a share transferor have to sign something for it to be legal?

I don't think anyone's claiming it's legal.

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Replying to lionofludesch:
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By Gone Sailing
22nd Mar 2021 10:26

So if it isn't legal, it hasn't happened, and you are right about the solicitor.

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Replying to Gone Sailing:
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By @fernando_london
21st Mar 2021 23:16

Yes it does.

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David Winch
By David Winch
21st Mar 2021 21:19

Obviously you need to consider making a Suspicious Activity Report to the NCA.

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Replying to davidwinch:
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By @fernando_london
21st Mar 2021 23:09

I am considering it once I gather more info.

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My photo
By Matrix
21st Mar 2021 22:58

What have you been engaged to do for this new client?

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Replying to Matrix:
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By @fernando_london
21st Mar 2021 23:14

With the RP02A Application for rectification by the Registrar of Companies, collection and verification of the docs related to the transaction from the actual company's accountant.

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Replying to @fernando_london:
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By Hugo Fair
21st Mar 2021 23:43

I'm completely confused as to what you are looking for from this site. Your initial post doesn't contain any question ... although you say "Any advice on the action my client should take would be greatly appreciated."
But now you say your role is to make an "RP02A Application for rectification by the Registrar of Companies" ... which has nothing to do with shareholdings.
As others have pointed out, you are as I understand it alleging fraud - in which your (or rather your client's) options relate to law rather than accounting ... and may be too expensive or time-consuming to be worth taking up (although that is her/his prerogative of course).
What specific question are you asking of members of this site?

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Replying to @fernando_london:
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By Matrix
22nd Mar 2021 06:01

The shareholders are not publicly available so what makes you think that changes have been made and that Companies House can help since no document has been filed which you can rectify. By reporting fraud how do you think your client will get their money back?

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Replying to Matrix:
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By I'msorryIhaven'taclue
22nd Mar 2021 10:38

Was a stock transfer form lodged at Cos House for the initial sale of 71% shareholding ? The transaction was for >£1k, so I'm assuming stamp duty would have been payable.

OP, do the buyer and seller have any prior dealings? This is all sounding rather like a boiler room scam. In any event, could you tell us exactly what forms were lodged at Cos House for the initial transfer? Was the old fox authorised to sell these shares ie either because he owned them or had agency powers?

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Replying to I'msorryIhaven'taclue:
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By Wanderer
22nd Mar 2021 10:52

I'msorryIhaven'taclue wrote:

Was a stock transfer form lodged at Cos House for the initial sale of 71% shareholding ?

Stock transfer forms aren't lodged at Companies House.
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Replying to Wanderer:
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By I'msorryIhaven'taclue
22nd Mar 2021 11:19

Thanks, Wanderer. I'm confused by the OP's assertions that the seller has used the company house login to notify / reverse the sale of shares. I've come across stock transfer forms being lodged at Cos House (and you are correct of course that there is no need to do so) and even directors' resolutions; or, alternatively, a Confirmation Statement filed immediately afterwards (even where one was not due).

So same question, OP, were stock transfer forms and stamp duty payment sent to HMRC? And, separately, what exactly are the documents that were filed at Companies House which, according to your post, were later reversed (by the seller) via the company's login to Cos House?

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Replying to I'msorryIhaven'taclue:
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By Wanderer
22nd Mar 2021 11:27

Perhaps PSC notifications?
In my expereince when Stock Transfer forms are sent to CH they are merely returned & don't end up on the CH file.

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Replying to Wanderer:
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By lionofludesch
22nd Mar 2021 11:35

Wanderer wrote:

Perhaps PSC notifications?
In my expereince when Stock Transfer forms are sent to CH they are merely returned & don't end up on the CH file.

If we knew what company it was, we could stop guessing.

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Replying to lionofludesch:
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By Hugo Fair
22nd Mar 2021 12:16

... and start having a productive day again!

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Replying to Wanderer:
A Putey FACA
By Arthur Putey
22nd Mar 2021 12:46

Stock transfer forms aren't sent to CH. They are only sent to HMRC if stamp duty is payable. I don't think we have an answer to the question, what evidence is there of the purchase of the shares which would support action against those involved in a the subsequent fraudulent transfer?

As if we care, 'cos its entirely a legal matter. Unless someone wants to ask how to account for it and/or what the tax impact might be depending on how the matter is or isn't resolved.

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