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Testimonial: Director avoids Director Disqualification for alleged misuse of Bounce Back Loan

The Insolvency Service also alleged failure to maintain adequate accounting records and /or the failure to deliver up accounting records to the Liquidator. The moral of this story – always check the small print!

In this testimonial, we explain how attention to detail by one of our director disqualification specialist solicitors, Mandeep Nagra, helped to persuade the Insolvency Service (‘IS’) to drop its investigation into our client. We had been contacted by the Director who had received correspondence from the IS. They were investigating the Director’s conduct in his failed company to decide if director disqualification proceedings should be brought against him. The main areas of investigation were as follows:

  1. Whether the Bounce Back Loan (“BBL”) was used entirely for the benefit of the company;
  2. Failure to maintain adequate accounting records and/or the failure to deliver up accounting records to the Liquidator. In their absence it had not been possible to verify the legitimacy of intercompany loans or that its expenditure was for legitimate company purposes.

The Insolvency Service’s Director Disqualification Questionnaire

The IS had, as usual, provided a questionnaire for the Director to complete before considering further whether disqualification proceedings should be brought against the Director.

Before completing the questionnaire, Mandeep requested from the Insolvency Service all the relevant evidence they were relying upon. This included the Director’s Conduct Report, held by the Liquidator, which had been sent online to the Insolvency Service to discharge their obligations under section 7A of the Company’s Directors Disqualification Act 1986 to report on the conduct of Directors of insolvent companies. In this case, the Director’s Conduct Report had stated that no company books and records had been delivered up.

It is important to note causing or allowing your company to fail to maintain, alternatively preserve and/or deliver up the company’s books and records has a criminal aspect to it also, in that it can result in a Director being imprisoned for between 2-10 years and be faced with an unlimited fine.

Mandeep discovered in the small print that the books and records HAD, in fact, been offered up

Mandeep, also obtained from the Insolvency Service the latest report from the Liquidator. Mandeep, carefully reviewed this and noticed in its Appendix that there was reference to “Collection and making an inventory of company books and records.” Mandeep also noticed in the same report that the Liquidator had concluded from his own investigations that they did not identify any actions which would lead to a recovery of the company’s creditors. This would have included the investigation of the BBL and its use.

Mandeep thereafter took detailed instructions from the client and duly completed the Insolvency Service questionnaire carefully and specifically made reference to the Liquidator’s report, to argue that there were no matters of unfitness by the Director, given that the books and records had been delivered to the Liquidator despite what was noted in the Liquidator’s Directors Conduct Report and that the Liquidator had also concluded that there was no action for recovery in the liquidation for the benefit of creditors.

Following receipt of the completed Insolvency Service questionnaire and our arguments that there were no matters of unfitness, the Insolvency Service wrote back to confirm that they did not propose to take disqualification proceedings against the Director.

The Director was delighted with the outcome:

“A huge thankyou to Neil and Mandeep from NDP. You have been superb throughout, at a time when I needed help and advice. Your work was efficient, clear and effective. I am very grateful for how you resolved my case. Excellent!”

Attention to detail is always crucial in these cases

It is important when you receive a letter from the Insolvency Service threatening Director Disqualification proceedings, and in particular a questionnaire to complete, to make sure that this is completed properly and with all the relevant evidence to hand. As demonstrated in this case, the key allegations were contradicted in the Liquidator’s report and drawing this to the attention of the IS was central to our client’s case.

If you are a Director facing an investigation by the Insolvency Service for alleged misconduct, including the misuse of a Bounce Back Loan or the failure to maintain adequate accounting records and/or the failure to deliver up accounting records, 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.