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Testimonial: The Insolvency Service drop a Director Disqualification investigation into alleged £50,000 Bounce Back Loan (“BBL”) fraud

Our client said: “This is quite literally life changing for me. Peace of mind cannot be underestimated!”

In this case, the Insolvency Service were investigating our client for allegedly providing false information relating to the date of incorporation of his company when applying for a Bounce Back Loan (BBL) and failure to maintain, preserve and/or deliver up adequate accounting records of the company following its liquidation. NDP were contacted by the Director after he had received correspondence from the Insolvency Service, who were investigating the Director’s conduct in his failed company and whether director disqualification proceedings should be brought against him. Senior Solicitor Mandeep Nagra managed the case for NDP.

The principal areas of investigation were:

  1. The Director had caused the Company to apply for a BBL totalling £50,000 for which it was not eligible by including false information relating to the date on which the Company commenced trading.
  2. The Director had failed to ensure that the Company had maintained and/or preserved adequate accounting records, or in the alternative, failed to deliver up such records as were maintained, and as a consequence it was not possible to verify various cash and transfers to the Director recorded in the Company’s bank statements in the sum of £125,012 and whether these were applied for the benefit of the Company.

Mandeep was able to prove the director had not given false information regarding the date the Company started trading.

Under the terms of the BBL application, the Company needed to show that it was actively trading as of 1 March 2020. The Director had previously informed the Insolvency Service (albeit without legal advice) that the Company did not commence trading until May 2020, which was also consistent with the Company’s bank account being opened on 18 May 2020 and the Company having filed dormant accounts for the period 11 April 2019 and 30 April 2020.

Mandeep, attended on the Director and took his full instructions, and discovered that the Company had actually been incorporated well before 1 March 2020, and that the Director had been using his personal bank account for the Company’s transactions following its incorporation and prior to 1 March 2020.

Mandeep further obtained documentation from the Director of various invoices and suppliers dating well before 1 March 2020, further providing evidence of the Company not being dormant, despite the Director having signed off dormant accounts. In addition, Mandeep got the Director to explain with evidence in support as to why he was not able to set up a bank account for the Company, and hence why he had to initially use his personal bank account.

At the same time, the Insolvency Service were unable to identify from the Company’s books and records payments totalling £125,012 made to the Director from the Company. As a result, there was an allegation that the Director had failed to ensure that the Company had maintained and/or preserved adequate accounting records, or in the alternative, failed to deliver up such records as were maintained following the liquidation to the Company.

Mandeep was also able to evidence that the Director had not failed to deliver up accurate records.

Mandeep explained to the Director that it was important for him to confirm the nature of the payments totalling £125,012 and to provide the necessary evidence of support in relation to the payments. This is especially so given that under section 386 of the Companies Act 2006, there is a statutory duty for a Company to ensure that it keeps adequate accounting records. Under section 387 of the Companies Act 2006, if a Company fails in its duty to comply with section 386, this amounts to a criminal offence, which could lead on conviction to a fine or imprisonment not exceeding two years (or both). It was therefore vitally important to ensure that there were no separate criminal proceedings, which could follow if the allegation to maintain and/or preserve adequate records, or in the alternative failed to deliver such records as were maintained, was successful by the Insolvency Service.

In order to deal with the accounting records allegation from the Insolvency Service, Mandeep tasked the Director to try and reconstruct what happened with regards all the payments totalling £125,012 and to provide all necessary invoices in support where available. Fortunately, the Director was able to complete this task and was further able to explain the nature of all the payments totalling £125,012, which he demonstrated were for the benefit of the Company.

The Insolvency Service decided not to continue with the case.

Following a series of correspondence between our firm and the Insolvency Service and by providing all the necessary evidence to negate the allegations of unfitness as alleged by the Insolvency Service, they finally confirmed that they would no longer being proceeding with Director Disqualification proceedings against the Director.

The Director was delighted with the outcome:

“Thank you. I can’t begin to explain the impact this process has had on my life, for me this started 3 years ago, and the mental stress manifested into physical trauma.

I am aware I’ve been difficult on you gents from time to time due to the stress but know that I am deeply grateful that you helped me navigate through this to such an outcome.

This is quite literally life changing for me. Peace of mind cannot be underestimated!

Thank you so much.”

This case shows that the Insolvency Service are prepared to drop their Director Disqualification investigations in matters, provided there are strong arguments to defend with evidence in support, as in this case.

If you are a Director facing an investigation by the Insolvency Service for alleged misconduct including a breach of the conditions of a BBL, then please get in contact with our experienced team of Director Disqualification specialists and regulatory solicitors on 0121 200 7040 or by email to law@ndandp.co.uk.