Bounce-back loan fraud – is the Government doing enough?
The BBC has recently reported that more than 16,000 businesses which obtained bounce-back or other Government-backed loans during the pandemic have gone into liquidation without paying back the loan.
A request made by the BBC under the Freedom of Information Act revealed that 260 directors had been disqualified to date with their companies still owing a bounce back loan. Absent some form of wrongdoing on the part of the director, the director is not personally liable to pay back the loan.
As a result of a change in the law implemented by The Rating (Coronavirus) and Directors Disqualification Dissolved Companies Act 2021, the Insolvency Service now has the power to investigate directors whose companies have been dissolved within the last three years and to seek an order that the director pays compensation to creditors in appropriate cases, i.e. where the loan has been used for improper purposes. The BBC reports that only one prosecution has been brought to date although the Insolvency Service has indicated that it has another 30 cases pending.
Whilst a number of agencies have been tasked with the job of investigating bounce-back loan fraud and recovering the money, the BBC reports that the Insolvency Service has no record of how much money has been recovered. Given the current economic outlook, it would clearly be beneficial for the Government to take a more cohesive approach to tackle the problem in order to seek to recover tax payers’ money.
Thousands of small firms go bust owing millions in bounce back Covid loans – BBC News
If you are a director or a company encountering difficulties and contemplating closure of the Company via liquidation or dissolution or are facing a claim relating to a bounce-back loan or other Covid-support scheme it is important to take advice early so that all options are identified and consequences considered. I
If you require advice on any aspect of personal insolvency, please contact Sarah Mower or John Bradshaw in our Insolvency & Business Recovery Team.
Sarah Mower is a chartered legal executive and specialist in Insolvency & Business Recovery at Barker Gotelee Solicitors.
Suffolk Insolvency Solicitors – for more information on our range of legal services, please call the team on 01473 611211 or email [email protected]