Director Faces Jail Time Over Fraud

In mid-February 2023 the Insolvency Service disclosed news of a haulage business director who had received a twelve-month custodial sentence due to his conduct related to a government Bounce Back Loan. The Guildford Crown Court wanted to make an example of the Director, imposed a financial sanction in the amount of fifty-thousand pounds in the form of an order of confiscation, and prevented him from operating as a director for seventy-two months.      

What Happened In The Case?

The person responsible for the day-to-day running of the organisation and acting in the office of director appears to have submitted an application for a business financial support mechanism to assist businesses during the Coronavirus pandemic in early June 2020 from his personal financial services provider as his organization’s representative. The financial support mechanism was implemented by the UK government if authentic commercial organizations experienced financial trouble. They were able to submit formal written applications for an interest-free financial credit facility of up to a limit of fifty-thousand pounds conditional upon meeting the twenty-thousand pounds turnover figure. The director successfully applied for the payment of the credit facility and it was made in early June 2020.    

Be Sure Your Sins Will Find You Out…

Matters deteriorated a few days after the financial support credit facility payment was made. The director appears to have sent the monies to his private banking facility forty-eight house from when the monies were received. However, events escalated when the business applied to liquidate the organization. The paperwork submitted by the director appears to have formally represented and communicated clearly to Companies House that third parties such as financial institutions who were owed monies by the business organization had been notified one week from when the paperwork was submitted to the regulator to formally liquidate the organization. In the paperwork, the regulator made it clear to directors that it is a criminal law breach if business representatives neglected their legal obligations if they did not formally communicate with financial institutions from whom the business had obtained financial credit facilities. The application to formally liquidate the organization appears to have been granted in October 2020. However, the Insolvency Service found indications that the directors had exaggerated the financial turnover in its application for financial assistance and found evidence of fraudulent misrepresentation.             

Feet to the Fire…

In mid-December 2022 the now former director entered admissions in the Crown Court in Guildford to non-compliance with the Fraud Act 2006 and Companies Act 2006.  

What Did The Insolvency Service Say?

The Regulator was critical of the person responsible for the day-to-day running of the haulage business observing that it had: 

• exaggerated its turnover 

• on receipt of the loan monies, paying them to a private banking facility and

• distributing the funds to members of his family and third-party businesses. 

Lessons Learned? 

The plight of this director is a warning to directors everywhere finding their businesses in financial difficulties and they need to be mindful of: 

• adhering to legislative obligations under the Insolvency Act and Companies legislation

• act in the best interests of the business

• entering the correct financial information on application forms

• acting honestly when providing turnover details 

• not using the monies for business stabilization and

• avoiding the need to distribute the monies to third-party businesses and relatives.   

This tactic will reduce the likelihood of breaching the legal requirements when applying for business support mechanisms. 

If you have experienced something similar, or have an opposing viewpoint, please kindly leave a comment on the article or contact us.  

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THE ARTICLE WAS WRITTEN USING THE FOLLOWING SOURCES 

[SOURCE 1]Insolvency Service – Kulwinder Singh Sidhu – Bounce Back Loan Fraudster - 15th February 2023 - Bounce Back Loan fraudster jailed for 12 months - GOV.UK (www.gov.uk)

[SOURCE 2] UK Government – Fact Sheet – Bounce Back Loan – 31 March 2022 - Fact sheet: Bounce Back loans - GOV.UK (www.gov.uk) 

[SOURCE 3] UK Insolvency Service – Fact Sheet: Bounce Back Loan – 31 March 2022 - Fact sheet: Bounce Back loans - GOV.UK (www.gov.uk)