Severe penalty for director who fraudulently took out three Bounce Back Loans
This recent director disqualification case shows just how seriously the Insolvency Service continues to take rule breaking of Covid support schemes for businesses.
The details of this case
Ruxandra Guja was the director of a decorating business in Romford called Roxy Contracts.
During the Covid Pandemic, she applied for 3 separate Bounce Back Loans from three different banks in 2020, securing 2 maximum £50,000 loans and a 3rd loan of £45,000, bringing the total she claimed up to £145,000 – £100,000 more than an individual business was entitled to.
The application sequence began in early May 2020, when she applied for a £45,000 BBL, based on a claimed turnover of £500,000.
One week later she applied for a second BBL, this time of £50,000, claiming a turnover of £250,000.
Finally, she made her third application in October 2020, again for a £50,000 BBL on a turnover of £250,000. Both of the final two applications were in breach of the rules of the scheme.
Roxy Contracts ultimately became insolvent, however, and Liquidators were appointed in June 2021, whose report led to the inevitable Insolvency Service investigation.
The outcome, following a hearing at the High Court in London on December 3rd, 2024, was that Ruxandra Guja:
- Received a 13-year director disqualification ban, which is close to the 15-year maximum disqualification period. It means she is banned from acting as a director until 2037, without the permission of the Court.
- Was ordered to pay compensation of £107,038 (equivalent to the sum of the two £50,000 loans plus interest) and costs of £7,592.
Dave Magrath, Director of Investigation and Enforcement Services at the Insolvency Service, said:
“The rules of the Bounce Back Loan Scheme were extremely clear. Businesses were only entitled to a single loan of a maximum of £50,000, depending on their turnover.
Ruxanda Guja clearly breached the scheme by securing three loans for her company, receiving significantly more than she was entitled to in the process.
This was taxpayers’ money and Guja now faces a director ban for the next 13 years in addition to repaying two of the loans back with interest.”
Our Director Disqualification Solicitors’ Comments
In this case, on the facts presented, it looks like there was no other outcome for the director. The Government , through the Insolvency Service (IS), has considerable powers to punish unfit directors, in this case those who have abused the BBL system.
Borrowing your way out of financial distress
Whilst it may seem to be a good idea, taking on more business debt during times of crisis is not always the best course of action, particularly if such actions are against the spirit of the law, or as in this case in direct contravention of the support available.
It is the duty of all business owners and any company director to ensure that they act correctly, as otherwise they could be held personally liable for the loan debt if judgment against them is made.
However, in our experience, allegations against company Directors for the alleged misuse of BBLs are not always so straightforward, it being possible that there were distinct financial problems that needed addressing.
The full circumstances of each case always need to be looked at, as only then is it possible to negotiate oneself out the penalties and obligations that may be imposed. The practical impact and consequences for Directors if not properly represented or advised can be devastating and can include director disqualification, a further penalty by way of a Compensation Order, or even a prison sentence.
Experts in Insolvency Law
There may be specific and particular circumstances in which the application for a BBL was made and how the sums received were applied that answer and meet the Insolvency Service’s concerns, as was not the case here. Each matter needs to be looked at in great detail, in particular the self-certification of turnover when the BBL was applied for. Take a look at this testimonial for BBL fraud allegations where we successfully persuaded the Insolvency Service to drop their allegations.
Our experienced team of director disqualification specialists is able and ready to assist you, or a client, if you face similar circumstances to those referred to above. Simply contact us or call us on 0121 200 7040 for a confidential, free of charge and no obligation initial chat.
