Welcome to the country’s No 1 firm of director disqualification solicitors. We have been defending directors for twenty years on all types of disqualification claims. Our latest advice involves enquiries about the Coronavirus Bounce Back Loan Scheme and bounce back loan insolvency.
Our specialist disqualification team is here to help – and we set out some information below which we think you will find useful. Whatever your issue – call our friendly team today.
The Bounce Back Loan Scheme
The Bounce Back Loan Scheme was introduced in March 2021 to help SME’s during the Covid pandemic. Businesses could borrow up to £50,000 with no fees or interest payable for the first 12 months. More than 1.5 million Bounce Back Loans totalling over £47 billion were given by the government. The government guaranteed 100% of the loan. The interest rate on the debt is 2.5% per year.
The Bounce Back Loan Scheme has now closed and businesses which borrowed Bounce Back Loans are now expected to start repaying them.
Insolvency Service Investigations into Bounce Back Loans
We are seeing an increasing number of investigations by the Insolvency Service into Bounce Back Loans where companies have gone into liquidation since the loan was taken out.
- This is leading to an increasing number of director disqualification claims being issued by the Insolvency Service and increasing numbers of disqualification bans.
- There is clearly a government drive to recover Bounce Back Loans and to punish those individuals who they think wrongly applied for them or used the money they received for other purposes.
Don’t panic if you are threatened with Bounce Back Loan Disqualification – we can help
Our experience over 20 years helping directors shows that the Insolvency Service takes a very broad-brush approach to seeking disqualification bans.
ALWAYS REMEMBER – just because a company went into liquidation owing a Bounce Back Loan does not mean that a director disqualification ban is automatic.
If you have received the threat of disqualification from the Insolvency Service (usually by way of a section 16 letter) it is vital to take early legal advice and respond carefully. Taking early action can avoid a director ban altogether.
On what basis can a director be disqualified?
For a director disqualification ban to be made, the Insolvency Service has to show that the director concerned was involved in some form of misconduct, and the misconduct is enough that they are unfit to hold the position of director moving forward. If these conditions are met – the director can be disqualified for between 2 to 15 years.
There are many different grounds for a disqualification order being made and many different types of misconduct. Our expert team has dealt with all conceivable types of misconduct over the last 20 years – examples of which include:
- Failure to keep proper accounting records.
- Failure to pay HMRC tax liabilities.
- Being incompetent in your role as director.
- Undertaking fraudulent activity.
- Failure to keep proper records at Companies House.
- Excessive pay and remuneration as directors.
- Abuse of a director loan account.
- Acting contrary to the public interest.
- Acting in breach of financial regulations.
- Inappropriate delegation of roles and responsibilities.
- Failure to keep informed and properly supervise.
- Continuation of a failed business model.
Added to this list now is misuse of Bounce Back Loans.
Does director disqualification automatically apply to Bounce Back Loan Insolvency?
The answer to this is NO.
If a company took Bounce Back Loans but later went into insolvency, it doesn’t automatically lead to Bounce Back Loan director disqualification. Bounce Back Loan insolvency can occur for a wide variety of reasons and Bounce Back Loans were taken by businesses to get them through a very difficult trading period.
Therefore, every case needs to be examined on its own facts. There is no one size fits all and just because your company suffered from Bounce Back Loan insolvency, does not mean there is an automatic Bounce Back Loan director disqualification for all the directors.
Central to dealing with Bounce Back Loan director disqualification claims is
- looking at the purpose of the Bounce Back Loan and why it was taken out;
- was the Bounce Back Loan for legitimate business purposes; and
- what the Bounce Back Loan was actually spent on.
In each case it will therefore be crucial to look at the application process and what the money was ultimately used for. Many of the misconduct allegations made by the Insolvency Service are in relation to Bounce Back Loans which appear to have been either fraudulently taken out with no intention of them being spent on the business or where the Bounce Back Loan was spent for purposes other than the original application.
Take early control of Bounce Back Loan director disqualification claims – let us help
It is vital to take early control of any threat of director disqualification. Failure to do so will only make things worse. Cases like this won’t just go away.
Helpful tips include
- If you receive an initial enquiry from the Insolvency Service (commonly known as a Section 16 letter) do not feel rushed into responding, particularly if you do not have access to all the company records.
- You are entitled to see the records of the business before responding. Do you have all the company records to support both the application for the Bounce Back Loan, the reasons why the Bounce Back Loan was applied for and how it was then spent? If not – you need to get them before responding;
- Ask for time to take legal advice – you are entitled to do this.
- Do not be rushed in to completing any Insolvency Service Questionnaire. Often, directors with the best of intentions fill out these forms incorrectly and this is then used against the director later on. It is much better to take expert legal advice and complete the early enquiry forms properly. There is every opportunity to have the claim withdrawn early on if these enquiries are dealt with properly;
- If there was a change in purpose for the Bounce Back Loan and it was spent on different purposes, can these be justified and do you have evidence for these?
- If all of the Bounce Back Loan or part of the Bounce Back Loan was used for personal remuneration, can these payments be justified and can the director show that there was an entitlement to these monies?
How we can help you
Whatever stage of the claim you are at we can help:
- We can conduct a proper review of the allegations against you and help draft a detailed response to the initial investigation enquiries and complete the relevant questionnaires.
- We can ensure access to the company records if you no longer have them.
- We can defend any formal director disqualification legal proceedings arising out of Bounce Back Loan insolvency.
- We can advise you on the consequences of disqualification and any personal liability arising from the bounce back loan insolvency
- We can advise you whether you will be personally liable to repay money under the new style Compensation Order Regime.
- We can help you negotiate a voluntary disqualification undertaking if that is appropriate – and make sure you minimise the length of any ban and reduce the risk of personal claims for repayment of money at the same time.
- We can help you become a director even if a disqualification order is made. Did you know that it is possible to apply to remain as a director despite a disqualification ban?
AT FRANCIS WILKS & JONES WE HAVE A 100% RECORD IN THESE TYPES OF COURT APPLICATIONS DATING BACK TO 2002.
- We can help defend any associated claims from the liquidator of the company.
- We can help defend any claims from HMRC.
- We can help you find the right funding option to help defend the threat of disqualification.
Francis Wilks & Jones is the firm for you
Whilst a number of law firms out there say that they carry out director disqualification work – Francis Wilks & Jones is the genuine No 1 law firm in the country. We have been advising directors for over 20 years and have a wonderful track record in dealing with these types of claims.
- OUR CASE STUDIES – WE ARE PROUD TO SHARE THE RESULTS OF OUR HARD WORK WITH YOU.
- OUR BRILLIANT FREE DISQUALIFICAITON GUIDES – OVER 150 FREE GUIDES COVER EVERY POSSIBLE SITUATION.
- OUR CLIENT TESTIMONIALS – READ WHAT OUR HAPPY CLIENTS SAY ABOUT US.
One of the most astute appointments I have ever made.A company director we successfully defended against disqualification
I would strongly recommend using FWJ for director disqualification matters. Tactically and commercially they played it just right and I am now able to get on with my business life without the worry of disqualification hanging over me.A director we defended against a disqualification claim
Whatever you decide to do next, do pick up the phone to us BEFORE MAKING A DECISION. We are sure that once you speak to our director disqualification experts, you will know that we are the firm to help. Call us today for your free consultation.
Recent bounce back loan insolvency disqualification examples
We will continue to update details of recent disqualifications – as a current guide to the attitude of the Insolvency Service
Two directors of Scholars Academy Ltd were disqualified for 11 and 10 years respectively.
Scholars was incorporated in December 2018 and purported to be a specialist tuition centre for children aged 5 to 17. A Bounce Back Loan was applied for in May 2020 and one of the directors provided an estimate of company turnover at £200,000.
Whilst companies were permitted to apply for a Bounce Back Loan (BBL) based on projected income, the Insolvency Service investigation found that Scholars’ bank statements showed maximum monthly income of just £640 – meaning a likely annual turnover of approximately £7,700. The minimum threshold for a Bounce Back Loan was £8,000, meaning that the company was not in fact eligible as it didn’t get over the threshold.
- Scholars received a Bounce Back Loan of £50,000 in May 2020 and then went into voluntary liquidation in January 2021.
- at the time of liquidation, the directors listed the company’s liabilities to the bank as £7,000 – but the bank later notified the liquidator that it was owed £50,000 by the company due to the Bounce Back Loan.
The Insolvency Service investigation found that as well as fraudulently inflating the company’s turnover, the directors has used the Bounce Back Loan funds to make monthly payments to four individuals – one of whom was a relation. The investigation found that none of the payments to the recipients were for genuine business purposes.
One of the directors was also the sole director of another educational company, Progress First Ltd, which had been incorporated in January 2018. He fraudulently declared in the application form that annual turnover in 2019 was £200,000, when Progress’ bank statements showed that turnover was £38,973. The company obtained a Bounce Back Loan of £50,000 when it would only have been entitled to a Bounce Back Loan of £9,927 had the true turnover been given. Regular payments were made to three individuals and no evidence has been produced to show that these payments were genuine business expenditure.
One of the directors has since repaid £35,000 to the liquidator to settle claims against him for the Progress Bounce Back Loan funds, and a further £25,000 in settlement of claims against both directors in relation to the BBL taken out by Scholars.
The Secretary of State accepted disqualification undertakings from both directors, with bounce back loan director disqualification bans of 11 and 10 years.
The disqualification undertakings prevent both from directly, or indirectly, becoming involved in the promotion, formation, or management of a company, without the permission of the court.
Mike Smith, Chief Investigator for The Insolvency Service said:
- Government loan schemes have provided a lifeline to millions of businesses across the UK – preserving their existence during the pandemic and protecting millions of jobs. As these cases show, The Insolvency Service will not hesitate to investigate and use its powers against those who appear to have abused the COVID-19 support schemes.
- It is important to note that all directors have a duty to ensure their companies maintain proper accounting records. The use of a Bounce Back Loan must be for the economic benefit the business and not for personal use. Failure to account for how a Bounce Back Loan was used, or using it for personal payments, can result in being disqualified as a director or the extension of bankruptcy restrictions.
Case 2 – 9 year bounce back loan ban for director of cleaning company
N&S Solutions Ltd was a cleaning services company incorporated in June 2018. It had one director. The company entered administration in August 2019 with debts of around £150,000. It later entered liquidation on 23 June 2020.
- the Insolvency Service investigation found that the director used N&S Solutions to apply for a Bounce Back Loan of £30,000 on 15 May 2020. This was despite the company being insolvent and had already ceased to trade, meaning there was no prospect of repayment of the loan.
- the loan was used to pay £29,940 to a single trade creditor and other creditors with sizable debts were ignored – as was the company’s HMRC tax liabilities which totalled £94,000.
The director gave a disqualification undertaking preventing him from acting as a director for 9 years.
Case 3 – Nottingham Chicken takeaway due get bankruptcy restrictions extended for 8 years
Two individuals ran Chunky Chicken, a local Nottingham takeaway until December 2019, when they sold the business.
- however, one of the individuals applied for a government-backed Bounce Back Loan of £50,000 in the business name after the sale of the company.
- the money was used to repay a business creditor and who was also a relative.
Both individuals made themselves bankrupt on 24 May 2021, saying they had debts of over £200,000 that included the Bounce Back Loan.
Both individuals have now signed bankruptcy undertakings that extend their restrictions for 8 years. This means they are limited to what credit they can access, as well as not being able to act as a company director without the permission of the court.
Case 4 – 8 years of bankruptcy restrictions for Publican
A publican ran the Royal Oak pub in Nuneaton. At the start of the pandemic in March 2020, the pub closed for lockdown and he entered into an Individual Voluntary Arrangement (IVA) and began to claim Universal Credit. The pub later reopened and traded for a few hours a week until it finally closed in November 2020 due to the reintroduction of COVID-19 restrictions.
- in November 2020, the publican received a Bounce Back Loan of £19,000. A day later, the supervisor of his IVA terminated the agreement, and confirmed to the Insolvency Service that he had had only made 2 repayments.
- as a result of the Insolvency Service investigation, it was established that the publican transferred nearly £17,000 of the Bounce Back Loan into his personal bank accounts, which he then paid over £4,100 to his ex-girlfriend and spent £1,120 on online gambling.
- nearly £3,500 was withdrawn in cash and cannot be accounted for. Only £6,500 was allocated as wages for himself to cover the period when he wasn’t working.
Separately, he also received £1,100 in business rates refunds in December 2020, just weeks prior to declaring himself bankrupt. He received a further £10,500 in subsequent weeks but failed to disclose this to the Official Receiver.
The publican signed a bankruptcy restriction undertaking that extends the duration of his bankruptcy for 8 years, starting on 18 December 2021.
Whatever your director disqualification enquiry or issue – we have the team of experts to help you TODAY. Don’t settle for second best – call the no 1 team in the UK – and we can help.
If there was ever a star rating for law firms, Francis Wilks & Jones would score five stars plus. Professional and pro-active, they were able to understand my problem quickly, provide expert advice, outline a solution and put it into place with a successful outcome. I should have gone to them sooner.A client we successfully defended in director disqualification and insolvency related proceedings