Scenario: On the root of the C drive you right click and select New "Folder". Windows will then create 4 New folder i.e. New Folder, New Folder (2), New Folder (3), New Folder (4). To delete or open these folders you need to elevate permissions on each one.
We have seen this issue only occur on Windows 10 systems applying Group Policy.
Cause: In our environment a specific Group policy was filtered to Windows 10 only. Within this policy the following security setting was set to modify C: drive file permissions:
Computer> Policies> Windows Settings>File System
The policy specifically was allowing Administrators Full Control and Users Read and Execute permissions to "This Folder" only. This had the affect of preventing sub-folders from inheriting Administrator / Users permissions.
If this policy does not exist or is set to "This folder, Sub-folders, and files" then the additional Folders are not created.
I believe this issue is a bug in the way Windows attempt to create the folder and inherit permissions; by default the folder will inherit from above but with this policy in place it fails to inherit and tries 4 times before timing out. Each attempt results in a restricted folder.