The Insolvency Service has been leading the charge in the government’s efforts to crack down on misused covid support by individuals and companies that have taken advantage of the financial aid provided to businesses during the pandemic.
In the 2022-2023 period, they utilized their civil and criminal enforcement powers to disqualify more than 450 directors who abused the COVID-19 support scheme, as part of their ongoing mission to track down fraudsters exploiting the pandemic.
Data released by the Insolvency Service in April revealed that directors found guilty of COVID-19 related misconduct are facing longer periods of disqualification, and some are even receiving prison sentences. The average disqualification period for directors in the past year was seven years and four months, an increase from five years and ten months in 2021-2022.
Out of a total of 932 director disqualifications obtained by the Insolvency Service in 2022-23, 459 cases involved the abuse of the COVID-19 financial support scheme.
Here are a few examples:
- The director of Digital Business Box Ltd., who obtained a £50,000 Bounce Back Loan and subsequently applied to dissolve the company just two weeks later. They were given a suspended prison sentence of 20 months, lasting for 18 months, and were required to complete 300 hours of unpaid work.
- The director of Conwy Valley Lodge Ltd., a hotel near Snowdonia in Wales, who secured a £20,000 Bounce Back Loan and then promptly applied to dissolve the company. They received a suspended prison sentence of 26 weeks, lasting for 12 months.
- The director of Safi Care Ltd., a company that provided staff for care homes, who obtained a £50,000 Bounce Back Loan and a £100,000 Covid Business Interruption loan. The company went into liquidation, leaving the full loan amounts unpaid, and the director was banned for 7 years.
- The director of Fortress Restructuring Ltd., who obtained a £50,000 Bounce Back Loan despite the company not trading. The company was wound up in the public interest upon the Secretary of State’s petition, and the director received a ban lasting for 10 years.
Apart from our civil enforcement actions, the Insolvency Service also initiated criminal prosecutions against six directors in 2022-23 for COVID-19 related misconduct.
Dave Magrath, the Director of Investigation and Enforcement at the Insolvency Service,
“These fraudsters are just the latest to find out that we will not hesitate to take firm action where we uncover such abuse, and this can ultimately result in a jail sentence.”
“The purpose of the Bounce Back Loan scheme was to support businesses during the pandemic, but it is clear a minority of company directors chose to maliciously abuse the scheme and defraud the taxpayer. Our team of experts continue to work round-the-clock to bring these criminals to justice.”
