Tough action taken against directors to tackle Covid loan misconduct
- 831 company directors banned in 2023-2024 for Covid support scheme abuse, up more than 80% on the previous year
- The average length of director disqualification for Covid misconduct in 2023-2024 was almost 10 years
During 2023-2024, a total of 831 directors were banned for Covid financial support scheme misconduct, with an average disqualification length of more than nine-and-a-half years.
Dean Beale, Chief Executive at the Insolvency Service:
Tackling Bounce Back Loan misconduct is a key priority for the Insolvency Service and we are determined to use all our available powers to remove rogue company directors from the corporate arena.
It is important the Insolvency Service is taking such robust action to clamp down on directors who abused Covid support schemes and took from the public purse during the worst global pandemic for 100 years.
We have teams dedicated solely to investigating Bounce Back Loan misconduct that are committed to taking action against those who provided misleading information to receive money they were not entitled to.
What was the Bounce Back Loan Scheme?
The Covid Bounce Back Loan Scheme was introduced at the start of the pandemic in 2020. It helped small and medium-sized businesses borrow between £2,000 and £50,000 at a low interest rate, guaranteed by the government.
Businesses were entitled to a single loan of up to 25% of their turnover under the scheme.
Individuals could only use the loans for the economic benefit of the business and not for personal purposes.
Enforcement action
Enforcement action taken against those that have abused the support schemes has ranged from companies being wound-up in court to criminal convictions, compensation orders and director disqualifications.
The Insolvency Service has successfully applied to have 1,430 directors banned for abusing Covid support schemes since it started investigating potential financial wrongdoing in this area in 2021.
Want to know more from the Insolvency service action.:
So what type of circumstance?
Directors banned for Covid loan abuse included those where investigations by the Insolvency Service revealed companies had no income in their bank accounts before receiving the loans.
Monies were transferred to their own account for personal use. In some cases funds were transferred to other businesses with no request explanation provided to the Insolvency Service.
Builder Darrel North was also banned as a director for 12 years after signing a disqualification undertaking in November 2023.
Obtaining loans by substantially inflating the turnover of company receiving more than entitled to.
There was for some no evidence that funds were used for the economic benefit of the business.
Director disqualification
Director disqualifications for Bounce Back Loan misconduct continue to be secured by the Insolvency Service, with many already having come into effect in the 2024-2025 financial year. Some directors have accepted disqualification undertakings.
In once case a review of the company’s end-of-year accounts in March 2020 and 2021 revealed it was dormant. Despite this, they declared an estimated turnover of £200,000 to secure a £50,000 Bounce Back Loan in September 2020. The loan was not used for the economic benefit of the business.
The Insolvency Service secured 459 director disqualifications for Covid support scheme abuse in 2022-2023, and 140 in 2021-2022, the first year after the Bounce Back Loan Scheme closed to new applicants.
Want to know more?
- Link to Insolvency Service news story
- Individuals subject to a disqualification order are bound by a range of restrictions
- Further information about the work of the Insolvency Service, and how to complain about financial misconduct.
PAYadvice.UK 13/4/2024 updated 2/9/2024