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Businessman's false listings highlight Companies House loophole

  1. TomHerbert

    TomHerbert UKBF Newcomer Free Member

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    A businessman who registered a company to former business secretary Vince Cable to demonstrate how easy it is to lodge false details with Companies House has been fined for deliberately falsifying information.

    Company director Kevin Brewer was ordered to pay over £12,000 after pleading guilty to filing false information on the UK’s company register.

    However, critics have labelled it a “pyrrhic victory”, as Brewer claims to have taken the action to highlight a loophole in the UK’s corporate registry. Instead, he became the first person to be prosecuted in the UK for falsifying filings.

    Accountants have previously expressed concern at the ambiguity in anti-money laundering regulations that allows criminals to incorporate directly with Companies House.

    Two’s company

    Brewer, the owner of Birmingham-based consultancy National Business Register, concocted the stunt to demonstrate that anyone could form a company in the UK, giving any name or address they wished. Using the Companies House online service he paid £12 each to register two fake companies.

    First, in 2013 he registered John Vincent Cable Services Ltd on Companies House, making former Business Secretary Vince Cable a director and shareholder without his knowledge.

    Brewer then claims to have written to Cable to inform him of the loophole and the company was dissolved and taken off the company register. Brewer also publicised this via an article in the Mirror.

    After perceiving no action being taken on the issue he formed another company in 2016, Cleverly Clogs Ltd, making Baroness Neville-Rolfe – the Minister with responsibility for Companies House – James Cleverly MP and an imaginary Israeli national, Ibrahim Aman, all directors and shareholders without their knowledge.

    Again, Brewer claims to have informed the government of his actions and the reasons behind them. This time Companies House dissolved the company, took it off the company register and prosecuted him under section 1112 of the Companies Act 2006, which sets out the criminal offence of providing false information on the company register.

    Brewer pleaded guilty at a hearing at Redditch Magistrates’ Court and was fined £1,602, ordered to pay costs of £10,462.50 and charged a victim surcharge of £160.

    ‘Right to take action’

    Vince Cable, now Liberal Democrat leader, told the Financial Times the punishment seemed “heavy handed”, but added that Companies House was right to take action against the fraudulent use of names, which is a “growing concern”.

    Baroness Neville-Rolfe told the FT the first she heard of the matter was when she received a letter at her private address informing her of her new directorship, and she felt it was a “pretty serious” matter. “It’s not a very pleasant thing to happen to you,” said Neville-Rolfe, “and I felt it was fair enough to assist in the prosecution.”

    A Companies House spokesperson told us that its records were under “constant scrutiny” by law enforcement agencies, and were a “powerful tool for identifying inaccurate or fraudulent information”.

    The spokesperson also said that Brewer had been warned not to proceed with the registrations and reminded of the law.

    Prosecution ‘beyond comprehension’

    However, the prosecution has been labelled by one commentator as a “pyrrhic victory”. For Richard Osborne, managing director of eFiling (and founder of UK Business Forums), the case exposed the loophole which makes Companies House, and the UK, a soft target for real criminals.

    “The government’s line was that he [Brewer] founded those companies with the intention of making profit off the back of the ministers’ names. Why would he do that and then write to the ministers involved telling them what he had done and asking for a meeting to highlight the problems? It’s beyond comprehension.

    “The government’s press release basically vindicates their line on not changing the legislation. But out of all the 4,000 beneficial owners of companies who are under the age of two, the thousands of register companies that Transparency International have linked to fraud, they chose to prosecute the one person who wrote to them to tell them this needs to be sorted out.”

    Almost 700,000 companies are created each year in the UK. A recent report from Transparency International flagged that Companies House currently has only six members of staff responsible for policing the 4m UK companies current registered, while Global Witness claims that almost a tenth of registered companies had broken UK rules by failing to name their controlling shareholders.

    This article was originally published by my colleague, Tom, over on AccountingWEB. You can visit the original article here.

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  2. Michael Loveridge

    Michael Loveridge UKBF Newcomer Free Member

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    This is an absolute disgrace. I've seen all too often how criminals and fraudsters can manipulate the complete lack of checks and security at Companies House to register companies and then use them to defraud people. It's unbelievable that the one man who has been prosecuted for filing false particulars is the man who should be praised for bringing this situation to the attention of the Government and the general public.

    And for Companies House to then boast about how clever they are for having prosecuted someone who actually publicised what he'd done in order to expose how useless they are is beyond belief. It smacks of persecution rather than prosecution - persecuting the poor guy for having had the temerity to expose them for the bunch of useless incompetents that they are.

    It's no wonder that London is now the money-laundering capital of the world - just watch Panorama to see how easily Ukrainian gangsters have bought millions of pounds worth of property here - http://www.bbc.co.uk/news/uk-43823962.

    Companies House are a laughing stock, and they may as well set up a stand at at the next Fraudex exhibition in Kiev to invite the crooks of the world to the fraud fest they've very kindly set up for them.
     
    Posted: Apr 27, 2018 By: Michael Loveridge Member since: Aug 2, 2013
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  3. The Resolver

    The Resolver UKBF Ace Full Member

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    The problem is much wider than forming companies for criminal purposes or claiming someone is a director/shareholder without his knowledge and agreement. I constantly come across examples of false claims that someone has been removed as a director or has transferred his shares. In my experience CH rarely uses its power to prosecute under s1112 instead saying it will take no action until the complainant issues a civil claim and obtains his own court order.

    What is needed is for CH to make it crystal clear whenever anyone seeks to file a change to the Register that it is a criminal offence to provide false information but, going further and whilst I can see that often perpetrators will claim ignorance of the law as to how to properly transfer shares or remove a director, CH should require evidence of documentation (eg Shareholder Resolution to remove a director with copy of the 28 day notice of the meeting or signed Stock Transfer Form for transfer of shares) before a change to the record is made. This firstly will put people on notice as to whether what they are about to file is fraudulent and also, whilst people may still wish to lie that will at least require them to create a fraudulent document on the basis of which they could no longer plead ignorance of the law.
     
    Posted: Apr 28, 2018 By: The Resolver Member since: Mar 31, 2006
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  4. TODonnell

    TODonnell UKBF Ace Full Member

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    This is an egregious example of 'shoot the messenger' and a worrying indicator that the UK might be turning into a banana republic.

    I am disturbed by the merely emotive style of governing we seem to be heading into, amplified by Twitter/Facebook and a traditional media desperate for eyeballs.
     
    Posted: May 2, 2018 By: TODonnell Member since: Sep 23, 2011
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