“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,” said David Meldrum, a restructuring and insolvency director with Azets.

He continued: “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. Legal obligations cannot be simply sold away and the best approach is to tackle issues promptly and to do so with the support and advice of a licensed professional.

“Business owners should be wary of any advisors who seek to avoid engaging with a licensed IP.”

The Insolvency Service (IS) 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. The IS also appointed provisional liquidators to two connected corporate rescue companies – Atherton Corporate (UK) Ltd and Atherton Corporate Rescue Limited – offering services facilitating the sale of distressed companies as an alternative to using insolvency practitioners.

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.

Mr Meldrum 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.

“Selling the share capital of a business and/or changing the directors noted at Companies House does not absolve any director from being liable for a director’s loan account owed to the company or other proceedings for misfeasance, wrongful and/or fraudulent trading, or reusing a restricted company name.

“Licensed insolvency practitioners often have a network of professional advisors and work in conjunction with them to offer the appropriate advice. However, directors should be extremely wary of any advisors encouraging them to avoid seeking advice from a licensed insolvency practitioner.

“Licensed insolvency practitioners are qualified and regulated individuals who have many years of experience and are best placed to assist businesses experiencing financial distress.

“If a director has doubts as to whether a person claiming to be an insolvency practitioner is in fact licensed, there is a register of licensed insolvency practitioners available on the Gov.uk website.”