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 directors banned over covid loans. We set out information below which we think you will find useful. Whatever your issue – call our friendly team today.
- Bounce Back Loan Scheme
- Insolvency Service investigations into Bounce Back loans
- Don’t panic if you are threatened with Bounce Back Loan Disqualification – we can help
- On what basis can a director be disqualified? Misconduct explained
- Does director disqualification automatically apply to Bounce Back Loan Insolvency?
- Take early control of Bounce Back Loan director disqualification claims – let us help
- How we can help you
- Bounce Back Loan Bankruptcy
- Bounce Back Loans & Liquidation
- Bounce Back Loan (‘BBL’) Compensation Claims
- Personal Liability & Bounce Back Loans – Are You Personally Liable for a Bounce Back Loan?
- Bounce Back Loans & Fraud
- Bounce Back Loans & IVAs
The Bounce Back Loan Scheme
The Bounce Back Loan Scheme was introduced in March 2021 to help SMEs 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.
However, the latest Bounce Back Loan government factsheet shows that there has been a lot of concern raised about alleged wrongdoing and action is being taken to recover money wrongly paid out. This is an issue which is commonly in the news – as this article from the BBC demonstrates. This focus is likely to remain for a number of years whilst the Bounce Back Loan repayments work their way through the system. We are seeing more and more directors banned over covid loans.
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 directors banned over COVID loans.
- 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. Directors banned covid loans are very much on the government radar.
- The most recent example of bounce back loan disqualifications can be seen in the recent publication on the Government website on 1st September 2023 where a director was banned from running businesses for a total of 13 years after abusing £50,000 worth of government-backed loans.
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. Directors banned over covid loans isn’t always the automatic outcome of an investigation.
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? Misconduct explained
For a director disqualification ban to be made under the Company Director Disqualification Act 1986, 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 periods of between 2 to 15 years.
There are many different grounds for a disqualification order being made and many different types of misconduct for which a director can be banned under section 6 of the Company Director Disqualification Act 1986. Directors banned over Covid loans is just one of them. 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 and directors banned covid loans. This is resulting in increasing amounts of directors banned over covid 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 and directors banned over covid loans. 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 directors banned over covid loans situation.
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 and lead to directors banned over covid loans. 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. Don’t get rushed into a directors banned covid loan situation.
- 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 under the terms of the Company Director Disqualification Act 1986. Remember – directors banned over covid loans isn’t simply automatic if proceedings have been issued.
- 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. This is a new regime which first appeared in the Small Business, Enterprise and Employment Act 2015.
- 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? We make these applications under section 17 of the Company Director Disqualification Act 1986. 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. Remember – directors banned over Covid loans isn’t automatic.
Bounce Back Loan bankruptcy
Our brilliant team often advises individuals about the dangers of bankruptcy arising from Bounce Back loans.
We have also seen a rise in bankruptcy restriction orders and bankruptcy restriction undertakings too.
Bounce Back loans and liquidation
When a director of a company realises that the company is struggling to pay its debts, they may seek the advice of an insolvency practitioner to provide advice and solutions moving forward. One of these solutions may be to ‘liquidate’ the company if it is insolvent and cannot pay its debts.
In brief, the following will then happen:
- the director of the company will hand over control of the company to the insolvency practitioner (later referred to as the ‘liquidator’)
- the liquidator will wrap up the affairs of the company
- the liquidator will ensure as much money is raised as possible to pay any creditors of the company; and
- the liquidator will investigate the conduct of the directors.
One of these creditors, as a result of the COVID-19 pandemic, may be a bank (or lending institution) that lent the company a bounce back loan.
From our day to day experience dealing with these types of cases, it is unlikely that the liquidator will bring a claim to recover the bounce back loan for payment to the creditors themselves. However, the liquidator is obliged to report to the Insolvency Service about the conduct of the directors of the company at the time of the liquidation. On this report, they will have to indicate that there was a bounce back loan and, following this, the Insolvency Service itself has the option to investigate the conduct of the directors.
The Insolvency Service may itself try and recover a bounce back loan from the director and we deal with this in our “Compensation Orders” section below.
Bounce Back Loan (‘BBL’) compensation claims
Compensation orders are part of a scheme introduced in 2015 under the Small Business, Enterprise and Employment Act 2015 that has been rarely used until the COVID-19 pandemic.
In order to be at risk a director must:
- be disqualified as a director; and
- have engaged in conduct which has caused loss to one or more creditors.
The Secretary of State has two years from the commencement of director disqualification to bring the claim.
Normally the liquidator appointed over the insolvent company seeks to recover most of the debts and “misplaced” money in the liquidation for the general benefit of creditors.
However, the Insolvency Service appears to now be pursuing a policy of recovering the bounce back loan element directly through the use of Compensation Orders. If the bounce back loan has been illegitimately applied for, or the monies have not been used for the benefit of the company, then the Insolvency Service will likely threaten a compensation order against a director. For more information about the Government’s position on Compensation Orders read here.
These are separate proceedings, and a director should consider legal advice very seriously or they can find themselves liable for the full debt of the bounce back loan.
Personal liability and Bounce Back loans – Are you personally liable for a Bounce Back Loan?
Generally speaking, when a director sets up a company, this company will be a separate entity from the director that can hold its own property, contract on its own behalf, and sue or be sued. However, upon the liquidation of this company, the barrier between the director and the company can be ‘pierced’ and this can result in the director being held liable for the debts of the company.
It is the duty of the liquidator to investigate the affairs of the company and, if they find any misconduct (such as money being paid out to friends and family, or assets being sold for much smaller sums than they are worth), then they will seek to ‘unravel’ these transactions or payments and claim the money back from the director.
The same, essentially, happens with a bounce back loan, but rather the Insolvency Service will be investigating the director’s conduct. As discussed above,
- the Insolvency Service (if they suspect misconduct) will likely bring proceedings against the director for disqualification.
- if they further identify a bounce back loan, they may then bring proceedings also for compensation to be paid by the director to the company for any part of the bounce back loan that has been incorrectly handled.
- in this way, the actions of the director can attract personal liability for taking out a bounce back loan.
Bounce Back loans and fraud
The Insolvency Service can seek disqualification against a director for a period of between 2 – 15 years and fraud is a serious allegation that usually attracts the upper band of disqualification (11+ years). There have been a number of incidences recently whereby the application of a bounce back loan has been directly linked to fraudulent activity.
- An example of this would be a dormant company, with no history of trading, that obtains a full £50,000.00 loan and withdraws the money from the company, which is then struck off the register.
- Another is where the stated turnover of the company at the time the bounce back loan was applied for was deliberately overstated.
The Insolvency Service is now trying to recover bounce back loan money (by way of compensation) in fraudulent circumstances on an accelerated basis. Directors banned over covid loans is increasing. Even innocent bounce back loan applications, which have a technical error such as an incorrect turnover estimation, are being investigated with the highest degree of detail and may be treated as fraud.
Therefore, strong legal advice is needed after the director becomes aware of such investigations in order to avoid being one of the directors banned over covid loans, a lengthy disqualification period and a compensation order.
Bounce Back loans and IVAs
An individual voluntary arrangement (‘IVA’) is a binding agreement between you and your creditors. These agreements are very flexible and can pay off varying levels of debts over varying timeframes.
Your bounce back loan will be relevant to your IVA if you:
- undertook your business in a sole trader capacity;
- took out a bounce back loan during the COVID-19 pandemic; and
- subsequently entered into an individual voluntary arrangement.
As you are a sole trader, there is no limited liability, and you are personally liable for this bounce back loan debt. Therefore, a bounce back loan will be treated like any other unsecured debt in the IVA.
The important element of a bounce back loan in an IVA is whether you believed your business was viable at the time of taking the loan and only borrowed what you were entitled to. The risk of taking out the loan illegitimately is that the bounce back loan application may be considered fraudulent. This can lead to proceedings later on and is a situation that will only be made worse if repayments of the bounce back loan are not agreed to and maintained by you.
Recent bounce back loan insolvency disqualification examples
We will continue to update details of recent disqualifications and directors banned over Covid loans – as a current guide to the attitude of the Insolvency Service investigations
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 pursuant to the terms of the Company Director Disqualification Act 1986.
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 under section 17 of the Company Director Disqualification Act 1896. They were directors banned over covid loans.
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.
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 pursuant to the terms of the Company Director Disqualification Act 1986. This was another example of directors banned over covid loans.
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 bankruptcy 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.
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.
The individual from Rotherham, has been disqualified as a director for 11 years from August 2022 after he took £200,000 of taxpayers’ money through the Bounce Back Loan scheme that his companies were not entitled to.
He was director of four companies that provided services to construction projects
One of the four companies was listed as dormant with Companies House by January 2020. Of the other three, their company accounts ending January 2020 indicated turnover ranging from just £635 to £3,400.
Despite this the individual, who was sole director of each company by 2020, stated on the application forms that turnover was between £200,000 and £320,000 for each company. This allowed him to secure four Bounce Back Loans for the full £50,000 permitted under the scheme.
He spent £174,000 repaying a personal loan to his former partner, which was also a breach of the loans’ conditions as they could only be spent on legitimate business expenditure.
In February 2021, he sought to dissolve all four companies. This was blocked due to the outstanding loans being identified, and instead the companies were placed in liquidation. The Liquidator has begun recovery action.
The Secretary of State for Business, Energy and Industrial Strategy accepted a disqualification undertaking after he admitted obtaining £200,000 in government Bounce Back Loans, the maximum amount available of £50,000 per company, by overstating company turnover, then using the funds obtained to repay a personal loan and not for the economic benefit of the company.
The disqualification undertaking prevents him from directly, or indirectly, becoming involved in the promotion, formation or management of a company, without the permission of the court under the terms of the Company Director Disqualification Act 1986. This was another example of directors banned over covid loans.
The 3 banned individuals were were directors of three separate companies that applied for Bounce Back Loans. But each caused their companies to abuse the Covid support scheme, which was only uncovered after the companies entered into liquidation.
Enquiries uncovered that one director received the maximum £50,000 Bounce Back Loan having submitted an application that declared a turnover of £225,000. However, the banned director grossly exaggerated the company’s turnover, which was closer to £24,000 and this would have only entitled a £6,000 loan.
Another individual was a sole director of another takeaway in Liverpool city centre. He caused the company to apply for a Bounce Back Loan and secured £50,000 claiming a turnover of £200,000. Investigators, however, found that the company’s actual turnover was closer to £100,000, which should have only entitled the eatery to circa £26,000.
The third director applied for a £50,000 Bounce Back Loan. But instead of using the loan for the economic benefit of the company, he caused the company to transfer up to £37,500 to his personal account.
The 3 restaurateurs are now banned from directly, or indirectly, becoming involved in the promotion, formation or management of a company, without the permission of the court.
The director from Essex has been given an 11-year ban for falsely claiming a £50,000 Bounce Back Loan for his property development firm. He was the sole director a company incorporated in August 2015 and traded as a property development company based in Essex until it went into liquidation in November 2021.
In May 2020, the director applied for a Bounce Back Loan for the company stating the company’s 2019 turnover as £600,000. This led to the company receiving the maximum £50,000 loan.
Bounce Back Loans were a government scheme to help support businesses through the Covid-19 pandemic. Under the rules of the scheme, companies could apply for loans of between £2,000 and £50,000, up to a maximum of 25% of their turnover for 2019.
But the company went into liquidation in November 2021, owing around £388,800, which triggered an investigation by the Insolvency Service.
Investigators discovered that the company’s turnover for the years ending August 2017, 2018 and 2019 had been nil, and the company had not been entitled to the £50,000 Bounce Back Loan. The full amount of the loan was still owed when the company went into liquidation.
The Secretary of State accepted a disqualification undertaking from the director after he did not dispute that he had caused the company to breach the condition of the government’s Bounce Back Loan scheme by overstating turnover in order to claim £50,000 to which the company was not entitled.
The disqualification ban began on 2 November 2022 and lasts for a period of 11 years. The ban prevents him from directly or indirectly becoming involved in the promotion, formation or management of a company, without the permission of the court. In order for him to become a director again he would have to make an application under section 17 of the Company Director Disqualification Act 1986.
The liquidator of the company is working to recover the full amount of the loan from the former director.
Three directors were banned for a total of 30 years after separate investigations found they had abused the Bounce Back Loan scheme during the Covid-19 pandemic.
Director No 1 was the sole director of a company in Birmingham. In May 2020 he applied for a Bounce Back loan of £50,000 for his used car dealership.
Bounce Back Loans were a government scheme to help keep businesses afloat during the Covid-19 pandemic. Under the rules of the scheme, companies could apply for loans of up to 25% of their 2019 turnover, up to a maximum of £50,000. All loan money had to be used for the economic benefit of the business.
Director No 1 stated in his loan application that the company’s turnover for 2019 was around £287,500, and received the maximum £50,000 loan for the company. But the business went into liquidation in August 2021 owing £53,500, including the full amount of the Bounce Back Loan, which triggered an investigation by the Insolvency Service.
Investigators discovered that the company’s turnover in 2019 had been just over £2,500 and the company’s bank statements for that year show no income or trading activity, meaning the business had not been entitled to a loan.
The company accounts also showed no evidence that the money had been used for the economic benefit of the company. A compensation order of £50,000 is now being sought, to repay the loan provider.
Director 2 was sole director of an IT consultancy which applied for a £24,000 Bounce Back Loan for her company in September 2020. The business went into liquidation in February 2022, owing £55,800, including the full amount of the loan, and triggering an Insolvency Service Investigation.
Investigators discovered that Director 2 had transferred £23,400 to herself between October 2020 and January 2022, just before the company folded, with no evidence that the money had been used for the benefit of the company.
Director 3 was sole director of a construction company. He applied for a £41,000 Bounce Back Loan for his building company, after stating on the application that the business’s turnover in 2019 had been £166,000. Under the rules of the scheme, if a business began trading after 1 January 2019, the estimated annual turnover could be used.
When Midi Construction Ltd went into liquidation in December 2021 with debts of around £46,000, including the full amount of the loan and almost £5,000 owed to HMRC, it triggered an investigation by the Insolvency Service.
Insolvency Service Investigators found that as the building company had only begun trading in June 2019, accounts showed that its turnover for the year ending 31 May 2020 was around £45,500. The company therefore received around £29,600 more than it was entitled to under the rules of the loan scheme.
They also discovered that payments of more than £39,700 had been made from the company’s bank account during a three-week period between October and November 2020, without any evidence to show that they were for the economic benefit of the company.
The Secretary of State for Business, Energy and Industrial Strategy accepted disqualification undertakings from the three directors after they did not dispute that they had caused their companies to either:
- provide misleading information to a bank to obtain a Bounce Back Loan when they knew or ought to have known that their business was not eligible for a loan of the amount claimed
- and/or not provide evidence to show that payments from the company bank accounts were used for the economic benefit of the company.
Two directors were banned for 11 years and another for 8 years.
The disqualifications prevent them from directly or indirectly becoming involved in the promotion, formation or management of a company, without the permission of the court.
Two co-directors of a purported specialist tuition centre have been disqualified by the Insolvency Service for 11 and 10 years respectively.
The company was incorporated in December 2018 and purported to be a specialist tuition centre for children aged 5 to 17. One of the directors applied for a Bounce Back Loan in May 2020 and provided an estimate of company turnover at £200,000.
Although it was permitted for a company to apply for a Bounce Back Loan (BBL) based on projected income in certain circumstances, the Insolvency Service investigation found that the company’s ’ bank statements showed maximum monthly income of just £640, suggesting that annual turnover was a maximum of £7,680. This meant the business would not have been eligible for a Bounce Back Loan, as it did not meet the £8,000 minimum annual turnover threshold.
Despite this, the company received a BBL of £50,000 in May 2020 and subsequently 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 BBL.
The Insolvency Service investigation found that as well as fraudulently inflating the company’s turnover, the directors used the BBL funds to make monthly payments to four individuals.
All four, one of whom was related to Ashraf, began receiving £2,000 per month following receipt of the BBL funds. Although the directors claimed that these payments were genuine business expenses, there was no evidence to support this.
Separately, one director was also sole director of another educational company, which had been incorporated in January 2018.
That director applied for a BBL in May 2020 and fraudulently declared in the application form that annual turnover in 2019 was £200,000, when Progress’ bank statements showed that turnover was £38,973.
This resulted in the second company obtaining a BBL of £50,000 when it would only have been entitled to a BBL of £9,927.
As with the first company , the director claimed that the BBL funds were used to pay for company expenses. Regular payments were made to three individuals and no evidence has been produced to show that these payments were genuine business expenditure.
The director has since repaid £35,000 to the liquidator to settle liquidator claims against him for the the BBL funds, and a further £25,000 in settlement of claims against both directors in relation to the BBL taken out by company No 1.
The Secretary of State accepted disqualification undertakings from both directors, one banned for 11 years, and the other for 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.
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
I was greatly impressed with FWJ. Their commercial approach combined with specialist knowledge and tactical expertise was pivotal in the claim being dropped and costs recovered in full.A director we defended in disqualification proceedings
I was greatly impressed with the commercial, tactical and technical ability of the team at FWJ. They quickly got to grips with a complex set of facts and, through their hard work, had the proceedings against me dropped and a significant proportion of my legal fees repaid. I couldn’t recommend them highly enough.A director we defended against a disqualification claim and other claims brought by a liquidator
DON’T SETTLE FOR SECOND BEST. WHILST LOTS OF LAW FIRMS OUT THERE WILL SAY THEY ARE DISQUALIFICATION EXPERTS, NONE HAVE BEEN DOING THIS WORK AS BRILLIANTLY AND AS LONG AS FRANCIS WILKS & JONES HAS. YOU CANT SHORTCUT EXPERIENCE – AND HAVING DONE THIS SPECIALIST WORK SINCE 2002 – WE CAN GENUINELY SAY WE ARE THE UK’s No 1 LEGAL EXPERTS.
PICK UP THE PHONE FOR A FREE CONSULTATION. AND JUDGE FOR YOURSELF. YOU WONT BE DISAPPOINTED.