4 Mins
When a business starts to struggle, directors often face a daunting choice: seek professional advice from an insolvency practitioner (IP) or try to “rescue” the company by other means. Unfortunately, some unscrupulous operators have capitalised on this vulnerability with schemes that sound almost too good to be true – and for good reason.
The Rise of “Business Rescue” Scams
One common type of scam involves companies claiming to offer business “rescue” services in exchange for a fee. Directors are told that, by transferring their shares to a so-called “business rescue company,” they can avoid the involvement of IPs and prevent the company from entering formal insolvency proceedings. These schemes are sometimes referred to as “Atherton-type” scams, after a well-known case that highlighted the dangers.
The pitch is simple: pay us, and we’ll save your company. The language is often persuasive and emotionally charged, preying on directors’ fear of losing control, reputational concerns, or personal liability. Victims are led to believe that selling their shares or assets to the rescue company will shield them from legal or financial consequences. They are told IPs are “aggressive” or “predatory,” and that this alternative route is safer.
However, the reality is very different. These arrangements do not protect directors or the company. Once the company is sold to the “rescue” company, it is typically left in the same financial peril. The directors who transferred the business may find themselves exposed to personal liability for wrongful or fraudulent trading, especially if creditors are left unpaid. The new owners rarely provide the promised protection; instead, the company often collapses or is stripped of assets, leaving directors personally liable and creditors uncompensated.
Legal Consequences and Safe Alternatives
The Insolvency Service has repeatedly warned about these schemes and is taking action against both the operators of the scams and the directors who have sold their companies. In some cases, directors who participate in these schemes are disqualified from acting as directors, while the scammers themselves face legal action, fines, and in some instances, criminal charges. Far from being a “rescue,” these schemes can accelerate insolvency and increase the legal and financial consequences for those involved.
Professional guidance remains the safest and most effective route. A qualified insolvency practitioner can provide independent advice, explore legitimate restructuring options, and ensure that directors meet their legal obligations while trying to maximise value for creditors. While the thought of paying someone to “fix” the company without proper oversight may seem appealing, it is almost always a high-risk strategy that can backfire catastrophically.
Conclution
In short, if an offer to rescue your business sounds too good to be true, it probably is. Selling shares to a third-party “rescue” company does not offer immunity from insolvency rules, creditor claims, or personal liability. Directors should be wary of any promise that bypasses professional scrutiny or legal obligations. Instead, seek trusted, independent advice early.
There is no shortcut around insolvency law, and schemes that promise one should be treated with extreme caution. Protecting yourself and your company starts with following the rules, not trying to evade them.