An increasing number of fraudsters disguised as white knights are buying controlling stakes in companies in financial trouble.
These fraudsters will then strip the companies of their most valuable assets, or attract as much credit as possible, before disappearing with a tidy profit, leaving creditors and shareholders with nothing, warns Paul Bennett, senior manager in the forensic and investigation services team at Grant Thornton in Birmingham.
"The scam, which is growing in popularity, is a fraudster's dream as it rarely gets adequately pursued," said Mr Bennett.
"Once a company is stripped bare of its assets, then there is no money remaining to allow an insolvency practitioner to investigate and pursue the fraudsters. In essence, creditors are usually reluctant to fund insolvency practitioners in an investigation to avoid throwing good money after bad, leaving the Insolvency Service to deal with the matter.
"Occasionally a creditor with deep pockets may provide funding on a matter of principal, or HM Revenue & Customs may fund an investigation for deserving cases deemed in the public interest. However, such cases are few and far between. A recent one saw a single fraudster play the scam on 94 companies before finally being sentenced to four years in prison and being dis-qualified as a director for 15 years."
Former directors who may have sold a business in good faith to fraudsters may also be at risk.
In some cases the original directors will not have been changed on the Companies House register, such that they may remain legally responsible for that company's conduct, finding themselves left to carry the can for the activities of the crooks.
One way to combat this would be for the directors to constantly check their listing on the Companies House website to monitor any changes in the company's details. A more efficient method may be to sign up to one or both of two new services being offered by Companies House.
The "monitor" service notifies firms by email of any documents filed in relation to that company. This service costs just 50p a year per company.
They can also sign up to the PROOF (Protected Online Filing) service for which security and authentication codes are provided to the directors and it is these codes that are needed to make any changes to the registered office and director listings.
"By keeping a close eye on any statutory changes which have to go through Companies House, directors can reduce the risk of fraudsters changing the identity of their company and engaging in a range of activities such as opening credit accounts with suppliers and ordering goods that are not paid for; obtaining loans; emptying existing bank accounts; and laundering money," said Mr Bennett.
