40% of director bans were for Covid fraud

40% of director bans were for Covid fraud
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Peninsula Team, Peninsula Team

(Last updated )

Nearly half of director bans in the last 12 months were related to covid fraud with less than a million pounds recovered

The Insolvency Service has confirmed that misconduct in relation to Covid-19 financial support, including bounce bank loans, accounted for nearly half of all director disqualifications.

There have been 459 disqualification bans, 101 bankruptcy restrictions and six criminal prosecutions related to Covid-19 fraud in 2022-23.

Additional funding was provided to help investigate this new area of misconduct, which led to an additional 61 director disqualifications being obtained. Further funding will be deployed to investigating and acting in relation to this type of misconduct over the next two years.

Dean Beale, chief executive of the Insolvency Service said: ‘A key area of focus for our work through the year has been misconduct in relation to Covid-19 financial support, accounting for nearly half of all director disqualifications outcomes, and 40% of all bankruptcy restrictions.

‘Where possible we have also taken steps to recover the funds lost to the taxpayer because of this type of misconduct, with over £835,000 of claims made against disqualified directors so far and many more cases in the pipeline.’

In one successful prosecution two directors of a company were sentenced at St Albans Crown Court to two years and six months and two years in prison, with each sentence subsequently being reduced to 18 months on appeal. The directors pleaded guilty to offences involving a fraudulent application for a bounce back loan. They had claimed a £50,000 loan by stating that the company’s turnover was £200,000. However, it was closer to £40,000. The loan was paid back in full.

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Highlighting the lack of checks on businesses who claim covid support, in one instance a director was disqualified for 11 years following an investigation into how the company obtained a bounce back loan of £50,000 in October 2020. The rules stated that businesses had to have been trading on 1 March 2020 to be eligible for any funding.

Following the company’s liquidation in 2022 with debts of over £150,000, Insolvency Service investigators found it had ceased trading in October 2019, with the restaurant currently at the address being owned by a different company.

Over the year, there were 942 director disqualifications and 250 bankruptcy restrictions along with 69 criminal prosecutions in 2022-23.

Nearly a third (30.9%) of directors were banned for at least 10 years, up from 6% over the previous period. Overall, there were 113 criminal investigations in the last year, down from 143 in 2020-21.

Over the year, the Insolvency Service delivered improved capability for digital forensic processing to support investigations. Work is also ongoing for delivery in 2023-24 of a new IT capability for investigators to handle and analyse increasing volumes of digital evidence, enhancing data security in line with the organisation’s data strategy.

For information on the remaining impact of emergency HR law put in place during the pandemic, visit BrAInbox today for instant answers to questions like Can employees carry over holidays to next year?

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