Consett in County Durham has recently hit the news as a hub of company set ups, with local people being paid to be directors and registered offices of companies. Many of these companies are used by overseas online businesses to obtain UK address, directors, company records and tax returns so they could trade in Europe. The scheme was orchestrated by Simon Dowson.
However, taking on the role of a director is not a purely administrative matter and should not be undertaken by anyone who is not also involved in the trade of the business.
Directors can find themselves on the hook to contribute to the company's assets if they are found to have continued to trade while the company is insolvent or likely to become so. Clearly they cannot know whether this is the case if they have no involvement with the underlying business.
Directors also have many compliance duties under the Companies Act and a failure to comply with them can lead to criminal sanctions, including fairly significant fines. It can also mean that these individuals may be prevented from being directors of other limited companies, which could jeopardise any other companies which they (legitimately) operate.
Some of the firms using this service have also been investigated, and some closed down, but there have been no criminal charges or sanctions brought against Simon Dowson or any of the directors. He was told what he had been doing was "incorrect or maybe not best practice" but "not illegal in any way, shape or form", he said. He has agreed to stop using untrained people as directors and said his company formation business would soon close.