No bouncing back for directors

20 May 2024. Published by James Wickes, Partner and Adam Craggs, Partner and Catherine Zakarias-Welch, Knowledge Lawyer

Banned! Fraudsters! – Terms used by the Insolvency Service for directors who abused the government backed loan scheme which was put in place to help businesses struggling during the pandemic. 

It may now be a rapidly fading memory, but it is only four years ago since the global Covid-19 pandemic struck and the UK, along with many other countries around the world, went into lock down.  With Covid dramatically affecting every facet of our daily lives, many businesses struggled to keep afloat.  In an effort to secure jobs, in March 2020, the government introduced the Coronavirus Job Retention Scheme, a furlough scheme which provided grants to employers to pay 80% of staff wage and employment costs each month, up to a total of £2,500 per person per month (the Scheme).  Under the Scheme, any entity with a UK payroll, including businesses, charities and public authorities, could apply for a grant so long as certain conditions were met.  The Scheme ran until September 2021.  During that time, the Scheme saw a staggering 11.7m employees furloughed with a cost of £70bn [House of Commons Library – Coronavirus Job Retention Scheme: statistics].   

The government also introduced a loan scheme in May 2020, in the form of the Bounce Back Loan Scheme (the BBLS), which was designed to enable businesses to access finance. The BBLS was available through a range of accredited lenders. Such lenders could provide a six-year term loan from £2,000 up to 25% of a business' turnover. The maximum loan amount was £50,000.  One stipulation in the loan agreement was that the money received could only be used to benefit the business, it could not be utilised for personal use.  Over 4.5 million loans were provided totalling approximately £47bn [Covid-19 loan guarantee schemes performance data as at 30 June 2023].  In its BBLS update, the National Audit Office (NAO) reported in 2021 that because of the speed at which the BBLS was launched, the government failed to put in place sufficient anti-fraud measures and proper checks and balances.  For example, lenders were not required to carry out credit or affordability checks on applicants  [NAO The Bounce Back Loan Scheme: an update 03.12.21].  The BBLS provided the lender with a full (100%) government-backed guarantee against the outstanding balance of the facility (both capital and interest).   

In 2023, the NAO declared that most public bodies do not know how much fraud they have fallen victim to.  In the two years before the outbreak of the pandemic, the NAO estimated the sums attributable to fraud committed against the government was in the region of £5.5bn.  The NAO estimated that, as at the end of March 2021 (the BBLS closed to new applicants in March 2021), fraud associated with the BBLS was in the region of £4.9bn [NAO The Bounce Back Loan Scheme: an update 03.12.21].      

Government data (updated in November 2023), indicates that some £1.65bn of the loans made under the BBLS were obtained fraudulently.  As of June 2023, the government has had to repay to lenders (as guarantor under the BBLS) £6.89bn, some 14.52% of the total loans made under the BBLS.  Of that sum, £1.27bn has been paid to lenders in relation to suspected fraudulent loans  [COVID-19 loan guarantee schemes performance data as at 30 June 2023].    

Many commentators are of the view that the government lacked capacity to properly police the BBLS.  When the BBLS was introduced, there were just two full-time staff in the government's counter-fraud function [NAO 2023 report].  Given the substantial sums underwritten by the government, in 2020 the National Investigation Service (NATIS), which investigates serious crime where public authorities, or the funds they manage, are targeted, was tasked with investigating BBLS fraud, but it was considered by many to be seriously underfunded.  In November 2023, the government provided an update on the BBLS performance data [Bounce Back Loan Scheme performance data as at 31 July 2022].  As at that time, NATIS had opened 273 investigations into suspected BBLS fraud since September 2020, the value was reported as £160m and a total of 49 arrests made.  In 2021/22, NATIS reportedly recovered £3.8m and £3.5m in 2022/23.  [Department for Business and Trade Departmental Overview 2022-23].  However, such a low level of recovery is disappointing.  Although referred to as a law enforcement organisation [NAO The Bounce Back Loan Scheme: an update 03.12.21], NATIS is a council department which used a police web domain and police email address, notwithstanding that it has no policing powers.  This has now changed to reflect the team's status as a government body.                  


Perhaps not surprisingly, given the above figures, abuse of the BBLS is a key priority for the Insolvency Service with Dean Beale, Chief Executive at the Insolvency Service, stating that they are "determined to use all [their] available powers to remove rogue company directors from the corporate arena".  Beale has confirmed that the Insolvency Service has dedicated teams whose remit is to act against those who provided misleading information and took money they were not entitled to under the BBLS.  

The Insolvency Service has a range of enforcement options available to it which it can deploy against those who misused the BBLS, including winding up companies, seeking director disqualifications and criminal prosecutions.  The Insolvency Service was provided with additional powers enabling it to investigate company directors of dissolved companies, (in addition to directors of companies that are on the official register at Companies House), in 2021 with the introduction of the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021.  This means that former directors cannot avoid being held personally liable to repay government backed loans simply because their company has been dissolved.    

The Insolvency Service has reported that in the last year 831 company directors have been disqualified for misuse of coronavirus business support schemes.  This is an increase of 80% on the previous year, in which 459 directors were disqualified.  The Insolvency Service started investigating coronavirus business support scheme abuse in 2021 and in that year, 140 directors were disqualified.  To date, a total of 1,430 directors have been disqualified.  

Between 1 April 2022 and 31 May 2023, the Insolvency Service secured:

  • 89 criminal charges;
  • 9 successful prosecutions;
  • £50,000 in criminal compensation orders;
  • £230,000 in voluntary criminal repayments;
  • £231,000 in civil compensation orders;
  • £449,000 in voluntary civil repayments; 
  • £300,000 OR recoveries; and 
  • 116 compulsory winding-up orders from petitions presented by lenders under the BBLS. 

From a perusal of the Insolvency Service's news and communications service, it has taken extensive action against those who abused the BBLS, including against:

  • An accountant who took out three BBLS loans despite only being entitled to one loan.  Although it was the company which acquired the loans, he was disqualified as a director and is prohibited from running a company for 12 years; he was also required to repay £75,000.
  • A plumber who used the loan monies he obtained under the BBLS for personal use, including paying for a holiday, gambling and investment in his father-in-law's business.  He was successfully prosecuted under section 2 of the Fraud Act 2006 on two counts of fraud by false representation.
  • A couple were successfully prosecuted and sentenced to 24 months imprisonment, suspended for 18 months, for fraudulently obtaining a £30,000 loan under the BBLS.
  • Two business owners who were disqualified as company directors after receiving BBLS loans for two separate businesses having exaggerated previous trading turnover.  


The Insolvency Service has not finished investigating suspected BBLS fraud.  Directors and former directors of companies which obtained loans which they were not entitled to under the terms of the BBLS, face potential investigation and possible prosecution where fraud is suspected.  The Insolvency Service is determined to take action against those who abused the BBLS.

For further information, please contact James Wickes / Adam Craggs.

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