COMPANY directors in Dorset are being urged to avoid engaging rogue unlicensed insolvency advisors.

Businesses risk severe financial penalties, being struck off as a director or at worst, a prison sentence, a leading accountancy and advisory firm is warning.

The Insolvency Service recently wound up Save Consultants Ltd which was found to be offering the services of an insolvency practitioner without the authority to do so, putting the integrity of the insolvency regime at risk.

Rob Young, a partner at Dorset accountancy and advisory firm Azets, said: “It is very concerning that some directors are engaging the services of unlicensed advisors, often in the belief that they can abdicate themselves of financial and legal obligations.

“Unlicensed advisors tend to use social media and direct marketing to target businesses that may have encountered financial problems with an offer to buy the business share capital and relieve directors of their liabilities and any debts.

“They will usually offer to facilitate, for a fee, the sale of a distressed company to a firm associated with the rogue advisor which they claim will absolve the director of any responsibility and protect them from any action if a licensed insolvency practitioner was subsequently appointed.

“The promises made are often completely false, but we estimate that several hundred businesses have engaged the services of these unlicensed advisors over the last five years, putting many directors at risk of further action months or even years in the future.

“Our advice to any businesses experiencing financial difficulty is to engage the assistance of a licensed insolvency practitioner."

New laws introduced in 2021 increased the powers of the Insolvency Service to clampdown on company directors who dissolve their businesses to avoid paying debts and settling liabilities.

Directors found to have acted improperly in dissolving a company can be banned for up to 15 years or prosecuted in more serious cases.

Engaging rogue insolvency advisors can put directors at severe risk of breaching these laws.

Rob added: “It is becoming more and more difficult for rogue insolvency advisors to operate, however, they still present a substantial risk to directors who decide to engage their services and follow their advice, which is often completely incorrect."