World’s richest person highlights corporate loophole

The “World’s Richest Person” varies from time to time, with the likes of Elon Musk, Jeff Bezos, and Warren Buffet all jostling for position. But one enterprising youtuber has claimed the trophy – for a few valuable moments.

Company formation

Youtuber Max Fosh, who enjoys a significant online following, decided to form a company using the Companies House online company formation facility. Inventively naming his creation “Unlimited Money Limited”, the company’s share capital at incorporation consisted of 10 billion shares, each with a nominal value of a fraction of a penny. Crucially, he was the registered owner of them all.

Inflating the value

Fosh then claimed that if he could sell just one of those shares for £50 it would be reasonable to work on the basis that all of his own shares would have a similar value and in so doing making him the richest person in the world, on paper at least. Inventive thinking from the star who ran for London Mayor last year.

Cue his attempts to find an unsuspecting member of the public to fall for his sales patter.

Sale agreed

Somewhat incredibly he allegedly found a member of the public who was willing to purchase a single worthless share from him. Sale agreed, he duly completed the change of share ownership.

This time next year

Based on the purchase price, Fosh then contacted a company valuer to confirm his aspiration. Although agreeing that technically there was an argument to support Fosh’s claim, the valuer warned that his activities were in breach of the rules, potentially fraudulent, and that he needed to strike the company off straight away.

Taking fright from such advice Fosh was seen contacting the “investor” to return the payment, while Companies House has recorded that it has received a voluntary application to strike-off Unlimited Money Limited.

Financial crime

Company law and associated financial services legislation set out strict requirements that must be followed for an offer of shares to the public. Some breaches carry criminal penalties although it is so far unclear whether the stunt has attracted a formal investigation. Although it is unlikely that the youtubers actions will be seen as a serious attempt to defraud members of the public, the rules are in place to protect the unwary and prevent fraudulent activity and require strict compliance.

A serious point

The affair highlights the relatively simplicity with which a new company can be formed. This has seen Companies House receive growing criticism at how easily shell companies can be formed prompting an influential group of MPs to recently call for the process to be overhauled. They have suggested that the rules should be tightened and for incorporation costs to be dramatically increased.

Balancing the risks

But while it is easy to point a finger, some would argue that the UK’s corporate regime is fully compliant with international requirements, and the ease of establishing a new business vehicle is vital for the UK to promote commerce and to attract entrepreneurs.Companies House would highlight that its services fulfill the statutory obligations as a registrar and that it is not, and never has been, a regulator.

Share issues

If you would like assistance with any aspect of company law, including how to ensure a planned share issue complies with the Companies Act, please contact the corporate team at Pinney Talfourd who would be pleased to assist you.

This article was written by Edward Garston, Partner in our Company & Commerical Team. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of March 2022.