“How can it be that there is no plot registered in our company's name?” he asked in astonishment.
“I am holding a current land registry extract now. According to the details you gave me, another company is registered in it as the owner,” I replied.
“That can't be,” he says. “I sent you the purchase agreement, you saw the land details. I don't understand this.”
“Strange,” I replied. “I'm ordering a historical extract. We'll talk in a few days.”
When the historical extract arrived it turned out that the plot had been sold in an enforcement proceeding to a third-party company. The client approved and we deepened the examination. The local office, through the power of attorney the client had given, went to the court and photographed the file, approached the enforcement officer and photographed the file there too. The report submitted to the client astounded him.
A lawsuit had been filed in the country in question against the company he owns. The lawsuit was filed by a company that was hired to provide management services to the client's company, and which claimed in court that it had not been paid the consideration for the management services. Service was effected lawfully at the registered office of the client's company in the country, and in the absence of a defense, judgment was given in favor of the plaintiff. In the auction process for the plot owned by the client's company, the plaintiff company and another company took part. The other company won the auction and bought the plot from the enforcement officer. The debt was paid to the plaintiff and not a penny was left for the client's company.
He called me in a rage after receiving the report. He told me an unbelievable story. The company had given a power of attorney to an Israeli CPA to manage the company's affairs, who promised him that he would see to leasing the land to a farmer in order to generate income for the company that would cover the management expenses, and later would prepare and submit plans to change the designated use of the land and to build private homes. The accountant passed away a few years ago and his son-in-law managed matters there. The client spoke only a few months ago with the son-in-law, who told him that he thought an update was needed to the company's registered office address in Romania, but did not say a word about the lawsuit and the sale of the land. The client also does not remember ever signing an agreement with any company for management services.
We continued to carry out a few more checks and it turned out that the plaintiff company is a company wholly owned by the son-in-law in question. The client also recalled that he had not visited the country where the company is registered and where he bought the land for 15 years, so there is no possibility that he signed the agreement for management services.
Amazing as the story may be, we faced the fact that a lawsuit had been filed against the company, the company did not defend itself, and judgment was given against it which was even enforced, and all the deadlines for filing an appeal had long since passed. All that remained was to examine the possibility of filing a police complaint for forgery and to try to sue the son-in-law and impose on him personal liability for his actions.
You bought property overseas or set up a company in a foreign country, here are a few recommendations on how you should protect yourself:
- Monitor the status of the property/company regularly. A property/company is not “set and forget”. You should receive periodic reports on their status. Visit the country from time to time.
- Receive regular reports on the company's activity in the foreign country, ask to see the annual reports submitted in the company's name to the tax authorities in the country, and also get explanations of what is written in them.
- Ask to receive a copy of every document the company has signed (especially agreements with suppliers). Make sure that all the contracts and documents relating to the property/company are written clearly and accurately and that you understand the obligations you have undertaken.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית