What Happened to My Company?

“How can it be that there’s no plot registered in our company’s name?” he asked, astonished.

“I’m holding an up-to-date land registry extract. According to the details you gave me, a different company is listed as the owner,” I replied.

“That’s impossible,” he says. “I sent you the purchase agreement, you saw the land details. I don’t get it.”

“Strange,” I replied. “I’m ordering a historical extract. We’ll talk in a few days.”

When the historical extract arrived, it turned out the plot had been sold to a third-party company in an enforcement (bailiff) procedure. The client gave the go-ahead and we dug deeper. Using the client’s power of attorney, the local office went to the court and copied the file, then went to the bailiff and copied his file too. The report we gave the client stunned him.

A lawsuit had been filed against his company in that country. It was filed by a company that had been hired to provide management services to the client’s company, which claimed in court that it hadn’t been paid for those services. Service was duly made to the client’s company’s registered office in the country, and with no defense filed, judgment was given for the plaintiff. Two bidders took part in the auction of the plot owned by the client’s company: the plaintiff company and one other company. The other company won the auction and bought the plot from the bailiff. The debt was paid to the plaintiff, and the client’s company was left without a penny.

He called me furious after he got the report. He told me an unbelievable story. The company had given power of attorney to an Israeli accountant to manage its affairs, who promised him he would lease the land to a farmer to generate income for the company to cover management costs, and later prepare and submit plans to rezone the land and build private houses. The accountant had passed away a few years ago, and his son-in-law had been running things since. Just a few months earlier the client had spoken with the son-in-law, who told him he thought the company’s registered office address in Romania needed updating, but said nothing about the lawsuit or the sale of the land. The client also doesn’t remember ever signing an agreement with any company for management services.

We ran a few more checks and discovered that the company that sued was wholly owned by that same son-in-law. The client also remembered that he hadn’t visited the country where the company is registered, and where he bought the land, in 15 years, so there was no way he had signed the management services agreement.

As astonishing as the story is, we were facing a fact: a lawsuit had been filed against the company, the company didn’t defend itself, a judgment was given against it and even enforced, and all the deadlines for an appeal had long passed. All that was left was to look into filing a police complaint for forgery and trying to sue the son-in-law and hold him personally liable for his actions.

If you’ve bought a property abroad or set up a company in a foreign country, here are a few recommendations on how to protect yourself:

• Monitor the status of the property/company regularly. A property or a company is not “fire and forget”. Get periodic reports on their status. Visit the country from time to time.
• Get regular reports on the company’s activity in the foreign country, ask to see the annual reports filed on the company’s behalf with the local tax authorities, and get explanations of what they say.
• Ask for a copy of every document the company signs (especially agreements with suppliers). Make sure all contracts and documents related to the property/company are written clearly and precisely, and that you understand the obligations you’ve taken on.