Restrictions to punish Covid loan misconduct
The Insolvency Service has secured bankruptcy restrictions as part of ongoing work to tackle Covid loan misconduct.
According to a recent press statement, Bankruptcy Restrictions Orders (BROs) and Bankruptcy Restrictions Undertakings (BRUs) have been secured against individuals who falsely applied for Bounce Back Loans (BBLs) during the pandemic.
These restrictions prevent individuals whose conduct has been considered dishonest or blameworthy from acting as a Director of a company, or forming, managing or promoting a company, without permission from the court.
They also make it illegal to carry on business under a different name without telling the people with whom they do business the name (or trading style) of the company in relation to which the individuals were disqualified.
To date in the 2023/24 financial year, the Insolvency Service has secured 757 director disqualifications and 69 bankruptcy restrictions relating to Covid financial support scheme abuse allegations.
Some of those found guilty recently of obtaining Bounce Back Loans have been handed severe restrictions.
For example, in February, Zbigniew Majewski accepted a 12-year BRU, having secured two £50,000 BBLs for his business in 2020, breaking the rules of the scheme which permitted only one loan for a company. He was declared bankrupt in March 2023.
The amount of money lost through deliberate abuse of BBLs, thought to be more than £4 billion, has led to HM Revenue & Customs (HMRC) investigating businesses they believe to have acted dishonestly, and the repercussions for Directors found to have acted fraudulently are intended to be severe.
Roger Isaacs, National Technical Director of NIFA, said: “The scale of Covid loan abuse is extraordinary but it is questionable whether BROs and BRUs have a significant effect as a deterrent.
“Although forensic accountants can examine financial documents to help identify whether Covid loans were misused, many of those facing disqualification have no intention of acting as directors ever again.
“Equally those amongst the more hardened criminal fraternity, tend to circumvent the effect of any ban by arranging for nominees to act as directors of their companies, whom they control from behind the scenes as so-called shadow directors.
“Consequently, if money is not recovered by HMRC and without evidence that BROs and BRUs deter future misconduct, it is questionable whether the Insolvency Service’s actions achieve very much for the tax-paying public in practice.”
Sources: Gov.UK
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