Director Banned For Four Years Over Credit Irregularities

Late into January 2023, news emerged of a director who had been barred by the Insolvency Service connected to allegations relating to financial abnormalities with some loans he incurred. The case is noteworthy and is a lesson to those seeking to borrow money, finding themselves in the precarious position of being afflicted by gambling addiction and having questionable creditworthiness accelerated by debt.  

What Happened In The Case?

The director at the center of the proceedings had applied for and successfully been granted a generous financial credit facility in the amount of twenty-five thousand pounds in the Autumn of 2019. All appeared to be fine on the surface. The director appears to have utilized just shy of fifteen thousand pounds of the twenty-five thousand pound loan facility to what the Insolvency Service described as the repayment of his financial obligations to persons loosely described as ‘friends’.   

The financial situation of the Director then appears to have deteriorated further between the months of mid-May 2020 and New Year’s Eve 2021 when he perceptively felt compelled to apply for utilizes a further financial credit facility of approximately forty thousand pounds. However, when the Insolvency Service conducted its investigation into the circumstances surrounding the borrowing of the monies by the Director, it discovered evidence seeming to suggest that at the time the first loan was granted, he had outstanding financial obligations in terms of debt in an amount just shy of seven thousand pounds. The Insolvency Service commented that this financial picture meant that the Director would be unable to satisfy his financial obligations and had no reasonable prospects of successfully paying the loaned monies back to the respective creditor. In terms of the situation with the second credit facility taken out between Mid May 2020 and New Year 2021 the Insolvency Service appears to have uncovered evidence that the director had not used the loan monies for the correct purpose but had seemingly squandered the loan monies on personal pursuits such as gambling. On the evidence, the Insolvency Services commented that the Director appears to have fed his habit by the triple combination of loan monies and, disability-related benefit payments in the amount of approximately thirty thousand pounds and seems to have racked up just shy of six thousand pounds of debt on credit cards.     

What Did The Insolvency Service Say?

Industry Regulator the Insolvency Service considered the evidence submitted to it, the circumstances surrounding the case, and the facts. In light of the above, it found that the behavior of the director was so serious that a four-year ban was imposed upon him. This was by way of punishment and to make an example of him if future persons similarly consider him.  

Lessons Learned? 

In this modern world, people can find themselves at the mercy of potentially crippling debt caused by their circumstances. However, businesses owners need to be carefully considering this case, learning the lessons taught by it, and taking the following action to mitigate the risk of being caught up in such matters in the future, in this regard they should be thinking about the: 

• avoiding getting into a situation whereby they are navigating their business into financial difficulties

• recognizing early indicators, signs, and signals of financial difficulties by forensically analyzing the business account records

• not getting into a situation whereby they are involved in the consumption of large alcohol volumes, illicit substances, and gambling

• budgeting 

• maximizing income 

• not borrowing money from associates and

• avoid racking up colossal credit card debt with no prospect of payback. 

ASSESSING FIRMS

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THE ARTICLE WAS WRITTEN USING THE FOLLOWING SOURCES 

[SOURCE 1]The Insolvency Service – Fahim  Afridi - BRO-BRU Details (bis.gov.uk)

[SOURCE 2] Oliver Elliot – Will I be Disqualified as Director Over a Bounce Back Loan? - Will I Be Disqualified As Director Over A Bounce Back Loan? (oliverelliot.co.uk)

[SOURCE 3] Francis Wilks & Jones – Director disqualification and bounce back loans - Director disqualification and bounce back loans - Resource - Francis Wilks & Jones (franciswilksandjones.co.uk)