Director Barred For Decade For Acting As Director Over Bounce Back Loan

On 9th December 2022, the Insolvency Service handed down its decision against a person responsible for the day-to-day running of a business specializing in engineering services barring him from operating as director connected to allegations of Covid Bounceback Loan Scheme conditions.  

What Happened In The Case?

It is important to look at the circumstances. The person appointed by the engineering services provider to manage the day-to-day running of the business by acting in the office of the director submitted two requests for financial assistance from the UK Government to steer the business through the Covid-19 pandemic. The business person had sought help from the Bounce Back Loan pool of financial resources. 

The pool of monies was allocated to businesses to assist them to get them back on their feet in the pandemic’s wake and if eligible for assistance, the Government would lend a maximum amount equivalent to a quarter of its turnover and the highest level it could utilize was fifty thousand pounds. There was also potential for future loans over time. Support requests were conditional on applicants evidentially demonstrating that the monies supplied were to navigate through the pandemic-related financial turmoil.

 The director of the provider of engineering services communicated in the paperwork that the last year’s turnover was two hundred and twenty-five thousand pounds and in the following month, a contrasting set of turnover figures was submitted to another support provider. However, the application appears to have met the criterion laid down and financial assistance was provided. 

Be Sure Your Sins Will Find You Out…

Everything seemed to be progressing without much incident until one fateful day the team responsible for looking into such matters at the Insolvency Service seemingly felt compelled to launch a probe into the circumstances surrounding what had taken place. On the evidence, it made some alarming discoveries that raised a few eyebrows. When it reviewed the latest set of accounts for the organization it uncovered some alarming revelations. Far from being in the position indicated in the application paperwork, the revenue for the business was merely just over forty-five thousand pounds. On closer inspection, the regulator quickly realized that the organization had entered into the insolvency process in the November of 2021 the account documentation strongly indicated that the business had a gaping black hole in their financial obligations and over one hundred and eighty thousand pounds was outstanding.  

What Did The Insolvency Service Say?

The Insolvency Services found the business had falsely represented its turnover to persuade the loan provider to provide the monies to the business. It also was damning of the decision to use the loan monies for personal reasons. For this reason, it decided to impose a ban over a decade.    

Lessons Learned? 

Lawyers should be advising their clients to absorb the message from this case by:

• ensuring they provide the correct financial details when completing financial assistance applications
• not applying for support ineligible
• highlighting what support money is to be used for
• think twice before using support monies for personal purposes
• carefully consider their duties in the office of the director
• acting in the best interests of the company
• conducting themselves with honesty and integrity at all times
• not breaching the responsibilities in respect of the business and
• hammering home the point that the Insolvency Service will consider imposing long-term restrictions on directors if breaching support terms 

Legal teams will mitigate the risk of directors being banned.  

ASSESSING FIRMS

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THE ARTICLE WAS WRITTEN USING THE FOLLOWING SOURCES 

[SOURCE 1] Pitcher, Greg – Construction boss banned after COVID-loan abuse – Construction News – 9th February 2023 - Construction boss banned after COVID-loan abuse | Construction News

[SOURCE 2] The Construction Index – Glasgow engineer abused £100k Bounce Back Loan – 9 December 2022 - Glasgow engineer abused £100k Bounce Back Loan (theconstructionindex.co.uk)

[SOURCE 3] Companies House - CKO CIVIL ENGINEERING AND SURVEYING LTD filing history - Find and update company information - GOV.UK (company-information.service.gov.uk)