Fraud type · Dormant company
The dormant company that suddenly wakes up
A fifteen-year-old company feels reliable. But what if it did nothing for fourteen years and got a new owner last month?
Why fraudsters buy old companies
A new company raises questions: no history, no figures, no credit limit. So fraudsters prefer to buy an existing company that has been dormant for years. Such a shelf company is cheap, has an old incorporation date and sometimes even a clean credit history. On paper it looks established.
After the takeover things move fast: new director, new address, new website, new activity. Then come the first orders on credit, or the company is used as a link in a VAT carousel or to move money. When debts pile up, the new director has vanished or turns out to be a straw man.
How to recognise a sleeper that just woke up
The key is the timeline. Do not only look at the incorporation date, but at what happened in recent months. A company with no turnover for years that suddenly places large orders, shortly after a change of director and address, fits this pattern.
Straw men as directors
The new director is often someone without visible business background, sometimes with a foreign address or directorships in many companies at once. On its own that says little, but combined with the other signals it is a clear warning.
9 red flags
- Recently a new director or ownerfollowed directly by large new activity.
- Address changed recently,often to a mailbox or shared address.
- A different activity than in the register,for example a former consultancy now trading electronics or fuel.
- Years with no or tiny figuresand now suddenly large orders.
- Late or missing annual accountsin the period before the takeover.
- Website and email domain much younger than the companyand the old website has disappeared.
- The director sits on many other boards,or on companies that went bankrupt.
- Quickly a large order on creditwithout any prior trading relationship.
- No former customer or supplier can be foundto confirm the history.
One red flag is not proof. If you see two or more, stop and check further first.
Checklist: how to check the history
- Review the changes in the register: directors, addresses, name and activity, with dates.
- Put the timeline next to the first contact. Did the takeover happen shortly before they approached you?
- Review the last years' annual accounts and whether they were filed on time.
- Look up the director and which other companies he is or was involved in.
- Compare the age of domain and website with the company's age.
- Ask for references from before the takeover and call them yourself.
- Start small or against prepayment until the company has built a payment history with you.
What to do if it goes wrong
- Stop delivering on credit and ask for prepayment or a bank guarantee.
- Start collection right away if invoices are open; with this pattern every week counts.
- Record all register details and changes with their dates.
- Report it if you believe the company was used deliberately to build up debts.
Let Safetybizz check it
Safetybizz lays out a company's full timeline: incorporation, changes of director, changes of address, figures and domain age. A sleeper that just woke up is visible at a glance.
See SafetyBizzFrequently asked questions
What is a dormant company?
A company that is registered but had little or no activity for a long time. Such companies are sometimes bought to use their incorporation date and clean history.
Is a company with a new owner always suspicious?
No. Companies are sold for many good reasons. It becomes a warning when the takeover coincides with other signals, such as a new activity, a new address and immediate large orders on credit.
Where can I see changes of director?
In the business register of the company's country. Many registers show the history of directors and addresses, sometimes for a small fee.
Read also
This page is general information and not legal advice.