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Bounce Back Loans and Director Disqualification

Testimonial from a client we helped avoid Director Disqualification following Liquidation, despite having had a Bounce Back Loan for £47,500.

Most right-thinking people will agree that individuals who misuse public funds in the form of Bounce Back Loans should be subject to the full rigour of the available civil and criminal law consequences. Here at NDP, we are instructed on many such cases where the Director of the failed company is being pursued in such circumstances for one or more of the following:

  • A financial recovery action from the failed company’s Liquidator.
  • Director Disqualification under the Company Directors Disqualification Act 1986, where the Insolvency Service alleges the Director has engaged in ‘Unfit Conduct’.
  • A Director Disqualification Compensation Order (‘DDCO’) from the Insolvency Service. (Comment – We have seen only 1 such case, post the pandemic, where we successfully opposed the claim for a DDCO, on behalf of the Director.)
  • A Criminal Law investigation. We have seen a number of such cases, that began life as a Civil Law   The responses of the targeted Director are vitally important.

However, not every company failure, following the taking of a Bounce Back Loan, should attract such dire consequences for the Director.  The Government rightly recognised when introducing the Bounce Back Loan Scheme, that some businesses receiving such financial support, would still fail for quite legitimate reasons.

In this article we address the question of: “how then does one distinguish between Bounce Back Loans taken and/or used for a proper, as opposed to an improper purpose?” We do so through a client’s testimonial for our work, in helping him avoid Director Disqualification.

The Objective for our team of Director Disqualification specialists

When representing the Director, the key is to look at all the circumstances of the individual case and put forward the best possible case on behalf of the Director, wherever the challenge to the Director may come from, as detailed above.

Our Client’s story

Our client was faced with a Director Disqualification investigation, where his company had received a Bounce Back Loan but then went into liquidation a few months later.

‘Following the liquidation of my limited company business, the Insolvency Service wrote and told me that they intended to pursue a Director Disqualification investigation into my conduct. Their stated ‘initial area of investigation’ was the company’s use of monies received in respect of a Bounce Back Loan totalling £47,500.

The Bounce Back Loan was vital in trying to secure the future of my business, following the awful impact COVID-19 was having on business worldwide.

The Bounce Back Loan was taken but my company still fell into insolvent liquidation, despite my best efforts.  Liquidation and the cessation of trade destroyed my business and livelihood.  The letter received from the Insolvency Service threatening Director Disqualification, only enhanced my concerns for my future and that of my family.”

Who to turn to?

“Based on a recommendation from an Accountant friend, I called Insolvency Solicitor Thomas Riley of NDP, who instantly put me at ease and explained the steps that we should take to resolve the queries of the Insolvency Service.

After a free of charge initial 30-minute chat with Thomas, I instructed him and his Paralegal colleague, Chloe Collins, to represent me. They listened to my story and drafted a detailed letter of representations to the Insolvency Service, urging them to consider all the circumstances of the case. That letter provided a meticulous and a thorough breakdown of the events which led to my business failing after the Bounce Back Loan was taken.  NDP explained the use to which I had put the Bounce Back Loan and explained why this was not misused given the circumstances I had found myself in during COVID-19.”

The Insolvency Service’s response

“The Insolvency Service after some initial exchanges, responded to NDP with confirmation that the Director Disqualification investigation had concluded and the Secretary of State did not propose to take disqualification proceedings against me.

This was brilliant news and a great testament to NDP’s brilliant efforts in getting the right result. I truly felt I had done nothing wrong. NDP articulated that to the Insolvency Service for me.  After almost 6 months of this awful and worrying Direct Disqualification threat hanging over my head, I could finally breathe again.

Following on from the trauma of the liquidation, the threat of Director Disqualification was a distressing period for me and for my family. The enthusiastic and focussed  assistance of NDP and their ability to understand my situation and contextualise it, using their insolvency law and disqualification  expertise, resolved the matter for me and my family.  My experience with NDP was a great one.  I would highly recommend their services to others facing a similar circumstance.”

(ML – Birmingham)

Talk to us if you took out a Bounce Back Loan, but were unable to save your business

Director Disqualification

There has been much talk about Bounce Back Loans being fraudulently applied for or  not being used for the purpose they were intended. Ranging from paying off mortgages to investing in property overseas, such actions will receive the full attention of the law. However, as this testimonial shows, businesses that have had a BBL and been unable, despite their best efforts, to turn their fortunes around and have entered liquidation, may still receive an Insolvency Service investigation with a view to Director Disqualification proceedings being undertaken against Directors.

Such an investigation is stressful, especially after a liquidation of a business caused by the pandemic. In these circumstances, the quicker the Directors talk to our Director Disqualification specialists the better. We know how the Insolvency Service works and what they are looking for and, as this testimonial shows, are well placed to convince them to drop their investigation. Click here to see some more testimonials.

Contact us or call us on 0121 200 7040 for a FREE of charge initial discussion.