Home » News » Director Disqualification News and Comments » Over 800 company Directors receive Director Disqualifications for abusing the Covid Bounce Back Loan (‘BBL’) Scheme in 2023/24

Over 800 company Directors receive Director Disqualifications for abusing the Covid Bounce Back Loan (‘BBL’) Scheme in 2023/24

The Insolvency Service (‘IS’) has reported that a total of 831 company Directors received Director Disqualifications in 2023 – 2024 for abusing the Covid BBL Scheme, a figure which is up more than 80% on the previous year. The average disqualification length was over 9½-years.

Here at NDP, we expect to see that figure increase in the period 2024 – 2025 as more cases are determined by the Courts, on application to it by the IS.

This statistic shows that the IS is more active than ever in investigating potential BBL fraud, as this quote from its Chief Executive Dean Beale, shows:

“Tackling Bounce Back Loan misconduct is a key priority for the Insolvency Service, and we are determined to use all our available powers to remove rogue company directors from the corporate arena.

It is important the Insolvency Service is taking such robust action to clamp down on directors who abused Covid support schemes and took from the public purse during the worst global pandemic for 100 years.

We have teams dedicated solely to investigating Bounce Back Loan misconduct that are committed to taking action against those who provided misleading information to receive money they were not entitled to.

In this article

We look at the key areas that BBLs were abused in and how big the problem is and look at 4 cases quoted by the IS in which Directors received bans for their conduct over BBL’s.

We also look at cases where we have represented Directors who were being investigated for BBL fraud by the IS where we were able to persuade the IS to abandon their investigation and why.

Key Conditions of BBLs

The Covid BBL Scheme was targeted at small and medium-sized businesses who were able to borrow between £2,000 and £50,000 at a low interest rate, guaranteed by the Government to help them get through the Pandemic. 2 key conditions were:

  • Businesses were entitled to a single loan of up to 25% of their annual turnover under the scheme.
  • Individuals could only use the loans for the economic benefit of the business and not for personal purposes.

The IS started to investigate potential wrongdoing in this area in 2021. In addition to Director Disqualification, other enforcement action taken against Directors who abused the support schemes has also involved criminal prosecutions and convictions for Directors (the first prison sentence came in June 2022 ) and Compensation Orders.

In all, circa £45 billion in BBL’s was loaned to circa1.47 million businesses. Government figures have shown that up to 500,000 businesses could have permanently ceased trading in 2020 had the BBL scheme not been available. However, The National Audit office estimated in 2021 that £4.9 billion of BBL applications were fraudulent. By June 2023, the Government reported that the fraudulent figure was considerably lower, at £1.65 billion, though still an extremely high figure.

Some IS cases where Directors were investigated and banned for BBL fraud

These 4 cases show how the Directors involved were able to successfully apply for and draw down BBL’s of a scale they were not entitled to before going on to use them for personal use.

  1. Richard Ward signed a 12-year Director Disqualification Undertaking in June 20231.

Ward, 42, of North Cross Road, Huddersfield, applied for 3 BBL’s worth a combined £120,000 in the summer of 2020 on behalf of Colt House Event Management Ltd, Colt House Developers Ltd and Colt House Bloodstock Ltd.

He claimed the companies ran corporate hospitality golf events, developed a large residential property in Huddersfield and purchased foals for future sale.

However, investigations by the IS revealed none of the companies had any income in their bank accounts before receiving the loans.

Ward also transferred at least £105,000 of the funds to his own account for his personal use.

2. Builder Darrel North was disqualified as a Director for 12-years after signing a Disqualification Undertaking in November 2023

North, of Bellhurst Road, Robertsbridge, East Sussex, obtained a £48,000 BBL in May 2020, which was topped up to the maximum £50,000 in November of that year for his D W Trading (South East) Limited business.

D W Trading was a construction company specialising in domestic renovations.

North was only allowed a single loan and substantially inflated the turnover of his company, receiving almost £46,000 more than he was entitled to. He ignored the rules of the scheme further when he secured a separate £40,000 BBL from another bank in May 2020.

Nearly £80,000 of the £90,000 was transferred to North’s personal bank account with no evidence that he used the funds for the economic benefit of the business.

3. Muhammad Anas, 24, accepted a 6-year Director Disqualification Undertaking which started on Tuesday 2 April

Anas, of Mamore Place, Glasgow, was the Director of internet and mail order sales firm TAA Clerical Services Limited.

The company successfully applied for the maximum £50,000 loan in June 2020.

In the same month, the funds were transferred to an unconnected company. Anas failed to provide an explanation for this transfer despite requests from the IS.

4. Sabine Zogota signed an 11-year Disqualification Undertaking also starting on Tuesday 2 April after breaching the scheme

The 34-year-old, of Hungerford Square, Weybridge, was the Director of Bespoke Surrey Ltd which offered interior design and fitting services.

However, a review of the company’s end-of-year accounts in March 2020 and 2021 revealed it was dormant.

Despite this, Zogota declared an estimated turnover of £200,000 to secure a £50,000 BBL in September 2020.

The loan was not used for the economic benefit of the business.

Not Every BBL investigation by the IS ends up (or should end up!) in Director Disqualification

Most Directors took out BBLs legitimately and used them correctly. However, in some cases the BBL was not enough to save the company, and these companies, often through no fault of their own went into liquidation, with the BBL still outstanding, which is enough to trigger an IS investigation.

We have been instructed many times over the last 3-years by Directors in this position and have a strong track record in convincing the IS not to continue with their investigations. Here are 2 examples:

  1. From December 2023 – NDP avoids a Director Disqualification sanction and also avoids a Compensation sanction for our Solicitor client

In this case, the IS alleged that our client Overstated his company’s turnover when applying for a BBL to obtain more funds than the company was eligible to receive during the Covid pandemic.’ If proved, this allegation of Unfit Conduct would have likely resulted in a period of significant disqualification for our Solicitor client (11-years plus), with potentially far-reaching consequences for his business, reputation, family and professional future.

We sought and obtained all evidence held by the IS that they relied upon to make their ‘Unfit Conduct’ allegation against our client, as well as seeking from the IS (and others) any evidence that could undermine the Secretary of State’s (‘SOS’) case (the IS has a well-established duty to act fairly).

The Solicitor client’s position was set out in a detailed letter of representations to the IS. The IS dropped their investigation shortly thereafter and confirmed the same in a letter to NDP. Always worth remembering the Director has knowledge as to what went on pre-liquidation. The IS does not. It is for the Director to fill in those knowledge gaps and with Solicitors, to deploy that material to best advantage. Take a look at the full story.

2. Another successful BBL Director Disqualification Investigation (‘DDI’) outcome for an NDP client

In this case, amongst other things, the IS alleged that the Director had caused his company to make an application for a BBL resulting in the company receiving a maximum BBL of £50,000, which it was not eligible for. The company had already received a sum of £150,000 prior to obtaining the BBL, via the CBILS scheme. The rules (it was said) did not permit this scenario.

Mandeep Nagra, a senior NDP Solicitor, took detailed instructions from the Director in order to understand the nature of his business, and then obtained from him all relevant evidence, to allow him to prepare a detailed letter of representations on his behalf to the IS setting out why it was not ‘expedient in the public interest’ (i.e. the legal test for the IS) to continue its DDI.

Mandeep set out in the letter of representations to the IS the genuine reasons why the company had failed to repay the BBL monies from the CBILS loan obtained and also demonstrated that the monies obtained for the business of the company were in fact used for the intended purpose as set out in the second CBILS application form.

In short, the matters complained of were not nearly as black and white as the IS suggested.

Following NDP’s letter of representations, the IS wrote back to confirm that they did not propose to take Director Disqualification proceedings against the Director. Take a look at the full story.

Lesson learned

The common thread through both of these case studies is that it is important, when you receive a letter from the IS threatening Director Disqualification proceedings for BBL fraud (or otherwise), to act promptly and to seek expert legal advice. These cases show with the right evidence and arguments in support that investigations from the IS can be successfully dropped.

If you are a Director facing an investigation by the IS for alleged misconduct including the misuse of a BBL, then please get in contact with our experienced team of Director Disqualification and Regulatory Solicitors on 0121 200 7040 or by email to law@ndandp.co.uk.

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