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Seven-year Director Disqualification for care home staff recruiter for abusing two Covid loan schemes.

The Director took out £150,000 of loans across 2 separate schemes and failed to show the money was used to support his business.

Director Disqualification, and even custodial sentences for directors who abused the various Covid Loan business support schemes, has been very much in the news recently. In this article we report on a case from March 2023, in which the director accepted a 7-year director disqualification undertaking for taking out a Bounce Back Loan and a Coronavirus Business Interruption Loan, totalling £150,000, for which following an Insolvency Service (‘IS’) investigation he was unable to prove that the money had been used to support his business.

The details of this director disqualification case.

James Ireri, from Surrey, was the director of a care home staff recruitment company, Safi Care Limited, from its incorporation in February 2015 until it went into liquidation in August 2021.

In May 2020, Mr. Ireri applied for a £50,000 Bounce Back Loan, which was the maximum allowable under the Government backed scheme.

Then, in August 2020, he applied for another loan of £100,000 for his business, from a different lender, and through the Coronavirus Business Interruption Loan scheme.

A key point here is that under the rules of the Covid loan schemes, eligible businesses were only able to apply for a single loan under one the schemes, although, a business could obtain a second loan if the money was used to repay the first in full.

When Safi Care Ltd went into liquidation in August 2021, more than £231,500 was owed to creditors, including the full amount of both loans. This triggered an investigation by the Insolvency Service.

During this investigation, Mr. Ireri failed to provide adequate company accounts and investigators were unable to determine whether Safi Care Ltd had ever been eligible to apply for the initial Bounce Back Loan, based on the company’s 2019 turnover.

The lack of company books also meant that Mr. Ireri was unable to prove that he had used the loan money for the economic support of the business – another key condition of the scheme.

Investigators discovered that more than £491,300 had been withdrawn from the company bank account between May 2020, when the first loan was received, and July 2021, shortly before Safi Care went into liquidation, including more than £80,000 for personal spending and around £93,900 of transfers into Ireri’s personal bank accounts.

A 7-year Director Disqualification undertaking was accepted.

The Secretary of State accepted a 7 year director disqualification undertaking from Mr. Ireri after he did not dispute he had caused Safi Care Limited to breach the terms of two Covid Support loans by failing to repay the Bounce Back Loan after obtaining the Interruption Loan, and by failing to provide adequate evidence of the company’s turnover or how the loan funds were used.

Neil North, Deputy Head of Investigation at the Insolvency Service, said:

“Bounce Back Loans and Covid Business Interruption Loans were designed to provide vital support for viable businesses through the pandemic. James Ireri abused not one, but two of these schemes.

His ban should serve as a warning to other directors who misuse financial support available to companies that the Insolvency Service is able to bring your actions to account and remove you from the corporate arena.”

Our Comment

On the face of it, this case was straightforward. The director did not dispute the findings of the IS’s investigation and accepted his director disqualification undertaking. However, not all such cases are so straightforward, and our experience is that it should not be assumed Covid Loan fraud has been committed, which is where we come in.

For example, as this testimonial shows, the alleged misuse of BBL funds, or any other form of Covid Loan for that matter, is not always straightforward. In this case, our Director Disqualification Specialists were able to convince the IS to drop their investigation by introducing them to the full facts of the case.

The key is always to look at the full circumstances of each case. 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. Each matter needs to be looked at in great detail, in particular the self-certification of turnover when the BBL was applied for.

Our experienced team of director disqualification solicitors is able and ready to assist you, or a client, if are facing an Insolvency Service investigation. Simply contact us or call us on 0121 200 7040 for a confidential, free of charge and no obligation initial chat.

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