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Hello Ray,
Thanks for your reply.
It seems too many third-level folders that need to inherit parental permission result in a time-out. In this way, please try create a test Public Folder with a few third-level folders to check the issue and tell us the result. Also, can you tell us the total size of the problematic public folder?
Meanwhile, may I know which Office 365 subscription are your organization using, Office 365 Business Premium, Office 365 Enterprise E3, etc?
Regards,
Rudy