Many Directors of failed limited companies have been brought to account, as a result of their fraudulent conduct in relation to application for Bounce Back Loans (BBLs) and/or the misuse of BBL funds once received by the applying company. Take a look at the Covid loan investigation trends.
The pro-active approach of the IS in pursuing Director Disqualification investigations and proceedings in particular in relation to Covid funding is reflected in the increasing number of Criminal investigations and Criminal prosecutions that are resulting in increasing numbers of Director Disqualifications and Criminal convictions against Directors.
Worrying times indeed for Directors. A mischief to avoid is where Directors who should not be pursued, are in fact pursued. That is where we come in as specialist Insolvency and Director Disqualification Solicitors, achieving excellent outcomes for such Directors – take a look at our testimonials.
This article looks at:
- Some recent Court outcomes (Civil and Criminal).
- Some takeaways for Directors and those advising them.
What are the Key Bounce Back Loan Court Outcomes arising from overstated and estimated turnover in BBL application forms that could lead to Director Disqualification and more?
1. What happened in Secretary of State v Kha’lique (re Nutriskin Limited) (CR-2024-002412)?
Background
The company was incorporated in August 2018 and started trading in January 2019. In June 2020, the company applied to Metro Bank for a BBL, obtaining £50,000, having represented its turnover to be £200,000. The company’s forecast income was forecast in 2019/2020 to be £124,000, rising to £335,000 in 2020/2021. However, its Accounts to 31 August 2019 (approved by the Director (‘D’) on 13 May 2020) showed actual turnover of only £10,500.
In the following few days transfers of £15,000 each were made to D and D’s wife, and to Mrs McKay (‘M’) (also a Director who had previously been disqualified by consent). Further transfers of £5,000 each to the same individuals were made in January 2021.
Director Disqualification proceedings followed.
Held
D was disqualified for 11 years and ordered to pay compensation of £45,000 and £5,000 interest and £17,500 costs.
Why Was the Director Disqualified and Ordered to Pay Compensation? Reasons
Chief ICC Judge Briggs made the following findings in an important Judgment handed down on 12 June 2025:
- The 11 year Order was on the basis that D knew or ought to have known (our emphasis added) he inserted false information in the BBL application form. The Judge did not decide which it was but still ordered 11 years. It was either an intentional misrepresentation or an innocent mistake, in which case D was careless.
- For the purposes of determining what period’s turnover should be used to determine BBL entitlement, ‘established’ should be read as ‘started trading’ otherwise it was impossible to calculate turnover.
- The turnover forecasts in this particular application ‘were demonstrably at odds with reality and wildly opportunistic’ and in order for them to be fulfilled, it ‘would have needed a monumental change in the company’s fortunes’.
- On the Compensation issue there was an interesting discussion about apportionment with his co-Director, M. M did not sign the BBL application, but she did know the company was not entitled to £50,000 and she did then receive half the loan funds (to repay her Directors Loan Account). She gave a pre-issue Director Disqualification Undertaking for 5 years as sought. She was not/is not being pursued for compensation. As D’s misrepresentation in the application form led to the company receiving a loan it was not entitled to, his misconduct caused the loss and there was no evidence the company benefitted. There was no evidence that the co-Director acquiesced in the loan application/turnover figure, and so D was liable to pay 100%.
2. What happened in Secretary of State v Thompson (Re Base Chester Ltd) (CR-2024-MAN-001161)?
- Overstatement of turnover in BBL application forms.
- Blaming the bank for that overstatement (never a good idea).
- Effect of repaying the BBL in full (as here).
- Case involved no allegation of misuse of BBL funds once received.
Background
D applied for a BBL of £43,875, when the company’s turnover only justified a loan of £28,415. D defended on the basis of his claim that the BBL application had been submitted by Barclays Bank on his behalf and therefore he was not responsible for the overstatement of turnover. At Trial, D suggested that the Secretary of State was in a better position than he was to obtain evidence from Barclays. He also said that the Court should draw an adverse inference from Barclay’s refusal to provide evidence.
Held (perhaps unsurprisingly)
District Judge Banks disqualified D for 4½ years.
How Did the Court Respond to the Director’s Defence and Full Repayment of the BBL? Reasons
The Judge said that if D sought to challenge an allegation, it was for D (not the Bank) to obtain that evidence. The IS had made reasonable enquiries with the bank and that did not prejudice D from obtaining his own evidence from the same source. He rejected the claim that the Secretary of State was in a superior position to obtain the evidence from the bank. The Judge also declined to make a negative inference on the bank’s refusal to provide an Affidavit – that decision could have been purely for commercial reasons – not necessarily to ‘cover up’ any potential wrongdoing as implied by D.
The disqualification period was reduced to 4½ years as D had repaid the BBL in full (albeit post Section 16 Notice), the overstated amount was relatively low and also there was no allegation of misuse. That said, the Judge considered D placing blame on the bank as an aggravating factor.
3. What Criminal Cases of Note Show the Risks of Bounce Back Loan Misuse?
R v Harrison (Crown Court at St. Albans). What Were the Facts and Outcome in R v Harrison?
Background
D applied for and obtained 4 BBL’s in 4 companies, 3 of which were dormant and in a fourth the turnover was overstated. The companies received £200,000 as a consequence, when the total entitlement was £16,000 in the fourth company only. The monies were not used for the economic benefit of the companies, rather for D’s personal benefit. Subsequently, D applied to strike all 4 companies from the register and 2 applications were successful.
Held
D was sentenced to 3 years and 2 months in prison, disqualified as a Director for 10 years and required to pay a victim surcharge.
Reasons
HHJ Chowdhry found D to be in the higher culpability range. There was sophistication and multiple victims (the public at large). Personal mitigation reduced the sentence to 4 years and a 20% credit for guilty plea further reduced it to 3 years and 2 months.
4. What were the facts and Outcome in R v Ahmed (Shohid) (Crown Court at Bradford)
Background
D made 3 applications for BBLs in the name of his wife (who was not authorised to make the application), on behalf of Red Square Restaurants Limited (‘RSRL’), 2 of which were successful. RSRL received £100,000 to which it was not entitled, by virtue of the fact that RSRL was not trading at 1 March 2020. He used the details of a member of the public without her knowledge to claim that she had become a Director of RSRL. He also adduced a fabricated invoice to IS Investigators in an attempt to show that the monies had been used properly.
Held
HHJ McKone sentenced the Director to 2 years immediate imprisonment. D was already disqualified as a Director at the time of sentence.
5. What were the facts and Outcome in R v Rubaszko (Crown Court at Isleworth)?
Background
D applied for a BBL in her own name in April 2021 stating that her business turnover was £210,000. There was in fact no business. £50,000 was obtained which was transferred to 5 Polish bank accounts. She subsequently petitioned for her own bankruptcy to avoid repaying the loan. On 12 May 2023 D entered into a 10 year Bankruptcy Restrictions Undertaking.
Held
HHJ Hammerton sentenced D to 18 months’ imprisonment suspended for 21 months, a curfew for 6 months between 7.30 pm and 6.00 am, 175 hours of unpaid work and 21 months’ supervision.
Reasons
The Judge considered D’s age (38), good character and remorse. Her employer wanted to retain her notwithstanding the offence. Good character, prison overcrowding and D’s mental health were mitigating factors. The sentence was suspended because there were good prospects of rehabilitation and a community sentence was appropriate. A Criminal Law Confiscation timetable was set.
6. What happened in the MBL Scaffolding Service Ltd case – 15 September 2025?
- Director fraudulently secured 2 £50,000 BBL’s.
- Director falsely stated his scaffolding business had a turnover of £500,000.
- Director applied for 2 BBL’s when the business was only entitled to one.
- Director was criminally prosecuted – he voluntarily repaid £55,608 before appearing at Leeds Crown Court on 15 September 2025.
Outcome
- Director was ordered to repay the remaining £59,578 within 6 months or face a year in prison.
- Director had previously received a 2 year suspended sentence in January 2025 in respect of his inflated BBL claims.
- Director aged 56 was disqualified for 5 years and ordered to compete 50 hours of unpaid work.
What Are the Key Takeaways for Directors Facing Bounce Back Loan Scrutiny?
- Whether a Civil or Criminal investigation, the well-advised Director should obtain specialist legal advice at the first opportunity.
- Whatever the directorial conduct complained of, he/she always has options. Learn about them, explore them and make decisions based on that advice. Our director disqualification solicitors can assist.
- It’s never too late in an investigation/prosecution to obtain advice that may result in an improved outcome for the Director.
- In an appropriate case, consider repayment of the BBL as a means of potentially reducing the period of Director Disqualification ban.
N.B. We have also reported on a recent 6‑year director disqualification for abusive phoenixism, where a director failed to pay substantial tax liabilities across two connected companies. This an other example of a reason for disqualification.
About the author of this article – Neil Davies
Neil Davies is the founder and managing director of Neil Davies & Partners (NDP) and a nationally recognised authority on Director Disqualification (DD) law. With over 30 years’ experience, he has acted in hundreds of DD cases, often involving complex allegations linked to Bounce Back Loans, fraud and insolvency. Neil is also a contributing author to Mithani on Director Disqualification, the leading legal text in the field, underscoring his expertise and influence in shaping UK DD jurisprudence.
FAQs: Bounce Back Loans and Director Disqualification
Can a director be disqualified for mistakes in a Bounce Back Loan application?
Yes. Even if the misstatement was unintentional, directors can be disqualified if they “knew or ought to have known” the information was false. Courts may treat carelessness as misconduct.
Does repaying a Bounce Back Loan reduce the risk of disqualification?
It can. Repayment – especially before proceedings – may be treated as mitigation and could reduce the disqualification period. But it doesn’t erase misconduct.
Can directors face criminal prosecution over Bounce Back Loans?
Absolutely. If the Insolvency Service finds evidence of fraud or dishonesty, criminal charges may follow. Recent cases show prison sentences and compensation orders are increasingly common.
What if the Bounce Back Loan was used to repay a Director’s Loan Account?
That may still be problematic. If the company wasn’t entitled to the loan, using it to repay a DLA could be seen as personal benefit and trigger liability or disqualification.
Is it ever too late to seek legal advice?
No. Whether facing investigation, proceedings, or prosecution, timely advice can improve outcomes – even late in the process.
