An insolvency practitioner has agreed to pay a £3,500 regulatory penalty following findings concerning pre-appointment fees in 25 cases and, separately, a failure to investigate a Bounce Back Loan in accordance with Statement of Insolvency Practice 2, commonly known as SIP 2.
The Insolvency Service published details of the sanction on 4 September 2026. The case is a useful reminder that investigations form an important part of an insolvency practitioner’s responsibilities when dealing with an insolvent company.
For directors, questions about a Bounce Back Loan should not automatically be interpreted as an allegation of fraud or misconduct. Where a company has entered administration or insolvent liquidation, reviewing how a government-backed loan was obtained and used may form part of the office-holder’s ordinary investigative work.
Why was the insolvency practitioner sanctioned?
The practitioner agreed to an aggregate regulatory penalty of £3,500 covering two issues.
- First, the Insolvency Service said that pre-appointment fees above those permitted by rule 6.7 of the Insolvency (England and Wales) Rules 2016 had been charged in 25 cases. This was found to breach the fundamental principle of professional competence and due care contained in the Insolvency Code of Ethics.
- Second, in a separate case, the practitioner had failed to investigate a Bounce Back Loan contrary to duties under SIP 2.
The published sanction does not say that the Bounce Back Loan itself was fraudulent or improperly used. It does not identify the company concerned, the value of the loan or what any further investigation might have established.
Those distinctions matter. The regulatory issue concerned the insolvency practitioner’s obligation to investigate, rather than a published finding of wrongdoing by the company’s directors.
What does SIP 2 require insolvency practitioners to investigate?
SIP 2 concerns investigations undertaken by office-holders in administrations and insolvent liquidations, together with the submission of conduct reports.
The current England and Wales version has been effective since 6 April 2016.
In practical terms, an insolvency practitioner appointed over an insolvent company may need to examine the company’s affairs, its records and the conduct of those involved in its management. The scope of the work will depend on the circumstances of the particular insolvency and the matters which reasonably require investigation.
This means that the office-holder’s role extends beyond simply collecting assets and agreeing creditor claims. The circumstances surrounding the company’s financial position and relevant transactions may also require scrutiny.
There are proposed changes to SIP 2 which would place greater emphasis on investigation, analysis, reporting and what constitutes the company’s records. However, those proposals were the subject of a consultation that closed on 6 August 2026 and have not yet replaced the existing SIP.
Directors dealing with an office-holder should therefore understand that requests for records and explanations are an established part of the insolvency process.
Why are Bounce Back Loans still being examined in company insolvencies?
Bounce Back Loans continue to feature in insolvency investigations because many companies which obtained loans under the government scheme subsequently entered liquidation or administration.
Where an insolvent company received a Bounce Back Loan, an office-holder may need to understand the circumstances in which the application was made and what subsequently happened to the funds.
That does not mean that every Bounce Back Loan received by an insolvent company was improperly obtained or spent.
Directors may have used the loan entirely for legitimate business purposes. Equally, there may be questions about the information supplied when the loan was obtained, the company’s financial position at the time or payments subsequently made from the loan proceeds.
The purpose of an investigation is to establish the relevant facts.
The recent regulatory sanction is significant because the Insolvency Service expressly identified a failure to investigate a Bounce Back Loan as contrary to SIP 2.
For directors, this reinforces the importance of keeping documents that explain both the original application and subsequent use of funds.
Where questions about a Bounce Back Loan develop into allegations concerning director conduct, our Bounce Back Loan director disqualification guidance explains some of the separate issues that can then arise.
What might an insolvency practitioner ask a director about a Bounce Back Loan?
The precise enquiries will depend on the company and the circumstances of the insolvency.
An office-holder may seek information that helps establish how the loan came to be obtained, the financial information available at the time and how the money was subsequently used.
Company bank statements, accounting records, loan documentation, management information and correspondence may therefore become relevant.
Directors may also be asked about particular payments made after the loan was received, particularly where the transactions require further explanation.
The existence of those questions does not itself establish liability.
A director may have a straightforward explanation supported by contemporaneous records. In some cases, the documentary evidence can be particularly important where several years have passed since the relevant decisions were made.
This is why directors should avoid reconstructing events from memory where records are available. A careful review of the documents can help establish what happened and the commercial circumstances at the time.
FWJ has acted for directors where allegations concerning Bounce Back Loans have ultimately been discontinued. One example involved allegations that a company had overstated its turnover when obtaining a loan. Following representations addressing the evidence and circumstances, the Insolvency Service discontinued its investigation. Read our case study about successfully ending a Bounce Back Loan investigation
What should directors do if a liquidator investigates their use of a Bounce Back Loan?
Directors should respond calmly and deal with the enquiries on their facts.
An investigation does not automatically mean that the insolvency practitioner believes misconduct has taken place. It may simply be necessary for the office-holder to establish how the loan was obtained and where the money went.
Directors should preserve relevant records and identify documents which support the decisions taken at the time. Where a particular payment is questioned, it can be helpful to understand its purpose, who authorised it and what supporting records exist.
Care should also be taken to distinguish between the different processes that may follow.
An insolvency practitioner’s investigation can result in no further action. In other circumstances, matters may be referred to the Insolvency Service or a liquidator may consider whether a separate civil recovery claim exists. Director disqualification proceedings, compensation claims and civil insolvency claims each involve different legal tests.
Early decisions about how enquiries are answered can therefore affect the director’s position later. An accurate, evidence-based response can help ensure that legitimate transactions are properly understood and that unsupported allegations are challenged.
Directors already facing allegations can obtain specialist advice on claims brought by liquidators and administrators against directors and any related director disqualification risk.
The September 2026 sanction is primarily a regulatory case concerning the standards expected of an insolvency practitioner. For directors, however, it also demonstrates that investigating Bounce Back Loans remains part of the insolvency landscape. Keeping appropriate records and responding carefully to reasonable enquiries can help directors protect their position if decisions made during the pandemic are examined years later.
