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Richard Ludlow

Partner - West Kent (Hadlow)

29th August 2023

Bounce Back Loans & Director Disqualifications

A large number of all director disqualifications in the past 15 months have involved abuse of Covid-19 financial support schemes – the Bounce Back Loan scheme (BBL) or the Coronavirus Business Interruption Loan Scheme (CBILS) official figures have revealed.

What do the figures show?

There were over 1,200 directors disqualified between 1 April 2022 and 30 June 2023, with over half of the disqualifications involving abuse of Covid-19 schemes – the majority involving bounce-back loans. It has also been reported that in the region of £1.1bn of loans have been identified as potentially suspicious or suspected of involving fraud or error.

These figures have been revealed after widespread public concerns as to potential fraud and abuse of the offered loans by the government during the pandemic.

Bounce Back Loan Abuse

The financial support scheme, which contained some £46.6bn of investment, was introduced during the pandemic in May 2020 by then chancellor, Rishi Sunak. The scheme has since faced a good deal of questioning from the public and opposition MPs as to the relaxed checks that were in place to do with the applications for the monies. All small and medium-sized businesses could borrow from £2,000 up to £50,000 – with the loans being subject to an extremely low interest rate (from accredited lenders) and the government acting as the guarantor for all.

Government minister, Theodore Agnew, left the Government last year – in his resignation he criticised the government’s “desperately inadequate” efforts to prevent fraud and abuse. He went on to say that “schoolboy errors were made: for example, allowing over 1,000 companies to receive bounce-back loans that were not trading when Covid struck.”

The figures show that about a quarter of all businesses – in the UK – received a bounce-back loan with the majority of the 1.5m loans, that were authorised, being paid to businesses with a turnover of less than £632,000.

An Insolvency Service spokesperson said: “Tackling Covid loan abuse forms a large part of our enforcement work, and to date we have already disqualified 752 directors, driving recovery of funds. Criminal prosecutions, where there is a higher bar and cases take longer to prepare, are also being brought forward.

“Abuse of Covid loan support schemes affects us all. Company directors who abused schemes that made taxpayer funds available to help genuine businesses during the pandemic have short-changed the public purse and reduced the funds available to properly support vital public services.”

Contact us

If you were a director of a company that has received correspondence from the Insolvency Service in relation to proposed director disqualification proceedings then contact Richard Ludlow on 01732 440855 to discuss the options which might be available to you.