Company Director Avoids Director Disqualification Proceedings After Insolvency Service Bounce Back Loan Investigation
KANGS has successfully represented our client, a former director of a liquidated hotel business, avoid Director Disqualification Proceedings under the Company Director’s Disqualification Act 1986, which sought to remove him from his role as company director.
Nazaqat Maqsoom of KANGS outlines the circumstances leading to the investigation conducted by the Insolvency Service.
The Circumstances of the Bounce Back Loans
During the course of the Covid-19 Pandemic, our client as director of a company operating within the hotel industry, obtained a government ‘Bounce Back’ Loan to support the company’s ailing business.
Although every applicant was only entitled to receive one such loan, our client, acting upon financial advice received from his accountants, obtained a second loan to which neither he nor his company was entitled.
Our client’s company was subsequently liquidated and the Insolvency Service commenced an investigation following receipt of an adverse report from the company liquidators.
During the course of the Insolvency Service investigation, it was discovered that our client had received part of the loan into his personal bank account, raising concerns that those funds had not been used for the benefit of the company, which is the prime requisite of all ‘Bounce Back’ loans.
Powers of The Insolvency Service
The Insolvency Service states that they:
‘…have the power to conduct confidential investigations into limited companies and limited liability partnerships where we have received information that suggests serious corporate abuse. We can investigate when the company is actively trading or has ceased trading without entering into insolvency proceedings but cannot use these separate powers when a company has been dissolved. If we feel it is appropriate, we may apply to the court for a company to be wound up and/ or for one or more directors to be disqualified.’
How We Assisted Our Client
In accordance with normal procedure, the Insolvency Service served our client with a Director’s Questionnaire which required a very detailed response and the production of specified correspondence and documentation.
The nature of the investigation being conducted by the Insolvency Service suggested that their intention was to recommend to the Secretary of State that Director Disqualification Proceedings should be commenced against our client.
To enable our client to submit a compelling reason against such proceedings, our legal team:
- discussed with him all aspects of the business, including the state of its trading activity immediately prior to the pandemic and the financial impact on the business, particularly profitability,
- considered the nature of the advice he had received from accountants in relation to both loan applications,
- obtained further information from our client’s accountant,
- collated, examined and discussed with our client all contemporaneous correspondence and potential exhibits,
- compiled and served an extremely comprehensive response to the Director’s Questionnaire in support of our client’s position.
The Highly Successful Outcome
Having considered all of the detailed evidence compiled and served by the team at KANGS, the Insolvency Service accepted our client’s explanations surrounding the events and, accordingly, found that his conduct was not such as to render him unfit to continue in the role of a company director.
In those circumstances, the investigation was terminated without any blemish on our client’s character.
Our client was understandably delighted with this successful outcome, which enables him to continue working in the hospitality industry which has provided his career for many years.
How Can We Assist?
The government has stated its intention to pursue all avenues leading to the discovery of fraud arising from the abuse of Covid financial support schemes, such as ‘Bounce Back’ loans. It is committed to identifying and the recovery of all fraudulently obtained loans, wherever possible.
Inevitably, given the national crisis prevailing at that time and the urgency with which many loans were granted, there existed a certain degree of ignorance, lack of understanding, and incorrect advice given as to the exact regulations governing the raft of measures operated.
The various government agencies who seek to recover fraudulently obtained or retained loans or other benefits and as illustrated above, will accept genuine error when proven.
KANGS has developed considerable expertise, since the pandemic, from assisting clients who have found themselves under investigation in relation to Covid-19 related government loans provided to support the short-term difficulties imposed upon their businesses.
If you are under investigation or accused of fraud related to Government loans, such as bounce back loans and furlough schemes or grants, and contracts introduced during the Covid-19 pandemic our team of solicitors https://www.kangssolicitors.co.uk/people/ are ready to provide legal assistance.
If you need advice or guidance, please do not hesitate to contact us and schedule a consultation with one of our experienced solicitors.
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through video conferencing or telephone.
Top ranked by leading legal directories Chambers UK and the Legal 500.
