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Bimal Kotecha

Article written by Bimal Kotecha, Solicitor, Litigation department

In June 2022, a sole company director was disqualified and sentenced to 24 months imprisonment for Bounce Back Loan fraud in the first successful criminal prosecution for the Insolvency Service of a Bounce Back Loan fraudster.

The director in question was a sole director of a pizza takeaway company incorporated in January 2020 and dissolved ten months later in October. The application to dissolve the company was signed in June 2020 but two weeks thereafter, the director applied for a Bounce Back Loan of £20,000. The director did not inform the lender that he was in the process of dissolving the company and by the time the loan was due to be repaid, the company had already been dissolved.

Bounce Back Loans were implemented during the COVID-19 pandemic to support businesses that were adversely impacted. Thousands of UK businesses took out Bounce Back Loans and other forms of borrowing to navigate through the pandemic.

In a separate case, an online beauty retailer that was incorporated in 2015 and entered voluntary liquidation in July 2021, who were not eligible for a Bounce Back Loan, managed to claim the maximum level of borrowing at £50,000. The director, who applied for the loan inflated the company’s turnover to receive this amount, admitted the company had been insolvent and was subsequently disqualified for 10 years from July 2022.

The government, through the Insolvency Service, and bearing in mind that it is the Guarantor of the bounce bank loans is adopting robust measures against those who obtained it under false pretences. The above cases demonstrate that the Insolvency Service will pursue criminal sanctions alongside disqualification proceedings under the Company Directors Qualification Act 1996.

If you have been affected by the content of this article or require advice on an insolvency matter, please feel free to email me or contact the Litigation department on 020 8308 3610.