Imagine waking up to the news that you are a director and 50% shareholder in a £1m UK company that you never created. Now, imagine that the co-owner of this business is not only someone whom you have never met, but someone who is currently subject to sanctions in the UK and charges of treason in Ukraine. That’s exactly what our client faced after he was named alongside a Ukrainian and Russian politician as director of a UK business listed on Companies House in November 2022.
Harmful links and reputational damage
The set-up and links to the sanctioned politician of the company in question, an agricultural holding company purportedly based in London, were first reported by a UK newspaper in April 2023.
“I originally learned of it from news published in the Ukrainian media concerning the article in the UK,” our client says. “Before then, I had been completely unaware of the company, and I have never met the sanctioned individual.”
Solicitor Elena Solovyeva, who supported our client, explains: “The suggested links to this politician were extremely harmful to our client. He faced seizure of his assets under various articles of the Law of Ukraine on Sanctions and the Criminal Code of Ukraine, not to mention serious reputational damage.
“Ukraine’s security services had also opened a criminal investigation against our client, during which time his companies’ offices were searched and various assets seized.”
Acting quickly, our client wrote to Companies House.
“I requested to be removed from the register and attached the relevant form,” he says. “I also reported the unlawful use of my personal data to Action Fraud.”
Unfortunately, Companies House did not accept his application to remove material about a director – known as a PR06 – because he had not used its dedicated portal. Action Fraud was also slow in its response.
“Time was increasingly of the essence,” our client says. “Being an alleged co-founder with a sanctioned individual who is wanted for high treason could have meant the seizure of all my assets under Article 5-1 of the Law of Ukraine on Sanctions, as well as Articles 111-1 (4) and 111-2 of the Criminal Code of Ukraine.
“The issue was also attracting a significant amount of media coverage in Ukraine, all of which was seriously damaging my business reputation.”
In response, the client instructed Gateley’s Complex International Recovery Work team to expedite his removal from Companies House and minimise further reputational damage.
“We resubmitted the PR06, but things still weren’t moving quickly enough,” Elena says. “We therefore issued a claim to the High Court under Part 8 of the Civil Procedure Rules, which provides an alternative procedure for claims that allows them to proceed more quickly where there is less likely to be a dispute of fact.”
The claim was successful, as our client explains: “The Court accepted my evidence that I had no knowledge of the company, that I was not involved in its incorporation, and that I did not consent to being its director, shareholder, and a person with significant control.”
In July 2023, following the successful hearing attended by No5 Chambers barrister, Alexander Heylin, the court issued a Section 1096 Court Order to Rectify, as well as an order for costs on an indemnity basis.
“The claimant’s name on this evidence has been used entirely dishonestly in an association of which he was entirely unaware,” commented Judge Green. “The contents of this case are potentially very damaging to him personally and economically.”
A concerning loophole
While the client’s name no longer appears on the listing for the company, the case does highlight a concerning loophole in English company and corporate law.
“At present, Companies House does not undertake identity checks on listed individuals,” Elena explains. “This means that it is entirely possible to appoint someone as an officer, shareholder, or person with significant control of a company without their knowledge or consent.
“Furthermore, with Companies House significantly overburdened, it is unlikely that it will make corrections in time to avoid reputational damage where details are listed fraudulently, or even maliciously.”
The client adds: “Given the current political climate, it is likely that certain individuals may choose to exploit this loophole to harm a competitor’s business. Thankfully, by acting quickly we minimised damage to my reputation, and raised awareness of the wider implications of this issue.”