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Subfolders not inheriting permissions from parent

I am running into the issue when modifying access a folder, and checking the "Apply this access list to all documents and subfolders in this folder". The permissions that are set at the parent folder level are not inherited by the subfolders and in addition to that, the email confirmation that is received contains the following error message: "Object reference not set to an instance of an object" Has anyone else had this issue before?

 

Thanks,

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