Figures published by the Insolvency Service reveal that nearly half of the 932 director disqualifications obtained by the Insolvency Service in 2022-23 were as a result of COVID-19-related misconduct. The length of the period of a director's disqualification have also increased.
Over 450 directors were disqualified by the Insolvency Service in 2022-23 for abusing COVID-19 financial support schemes. The average length of bans handed out to directors in the last year was seven years and four months, up from five years and ten months in 2021-22.
In addition to its civil enforcement action, the Insolvency Service also brought criminal prosecutions against six directors for COVID-19-related misconduct. All of the prosecutions resulted in a conviction and resulted in immediate imprisonment in one case.
The Insolvency Service reported three cases.
Case 1
Bahar Dag was sentenced at St Albans' Crown Court to two years and six months in prison, with her husband Baris Dagistan sentenced to two years, both having pleaded guilty to offences involving a fraudulent application for a Bounce Back Loan.
Bahar Dag had claimed the full £50,000 Bounce Back Loan by stating the company’s turnover was £200,000. However, it was closer to £40,000. When Insolvency Service investigators made contact, and the couple realised they had been caught, they repaid the Bounce Back Loan in full.
Case 2
Jubelur Rohman, sole director of Better Day Ltd which gave its business address as the Indian Ocean restaurant in Wrexham until 2019, has been disqualified as a director for 11 years following an investigation into his company’s £50,000 Bounce Back Loan obtained in October 2020.
- His company went into Liquidation in 2022 with debts over £150,000.
- Insolvency Service investigators found it had in fact ceased trading in October 2019, with the restaurant currently at the address being owned by a different company.
- The rules of the Bounce Back Loan scheme were clear that businesses had to have been trading on 1 March 2020 to be eligible for any funding.
Rohman took out over £40,000 in cash from the company’s bank account between October 2020, when the loan money was received, and March 2021. There was no evidence to show the funds had been spent for the economic benefit of the company.
Case 3
Craig McCourt, the sole director of Craig McCourt Electrical Services Ltd, an electrical installation company in Ross-shire, was disqualified as a director after he applied for Bounce Back Loan funding on two separate occasions, despite his company having already Ceased trading and therefore not eligible for any financial assistance.
Although he later dissolved his company, he was caught due to new powers granted to the Insolvency Service which enable it to investigate directors of dissolved companies, particularly where bosses are suspected of using this as a tactic to avoid repaying taxpayer-backed Covid-19 support money.
- Craig McCourt Electrical Services had not been trading since September 2019 but applied and received a £15,000 Bounce Back loan which was immediately transferred to another bank account.
- In November 2021, a month after the company had been dissolved he applied and received another £5,000 top-up loan.
- At the point he dissolved the company in October 2020, nearly all of its £20,000 Bounce Back Loan remained outstanding.
As a result, Craig McCourt was disqualified for 11 years.
Useful guides on this topic
Ceasing trading Index: What are your options?
Subscriber guide to closing down your company.
Liquidation
How do you wind up (liquidate) a company? What types of liquidation are there? What are the formalities and the tax consequences of liquidation?
Tax debts and insolvency
This guide summarises the treatment of tax debts to HMRC in insolvency cases.
COVID-19: Loan funding
COVID-19: different types of loan funding. All loan funding is repayable.
COVID-related tax fraud costs us billions says PAC
The Parliamentary Accounts Committee (PAC) has published a report 'Fraud and Error', warning that government actions “significantly increased” UK taxpayers' exposure to a loss of billions of pounds through fraud and error in administering Coronavirus support packages.
External links
The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act. This became law in December 2021, extended the Insolvency Service’s investigatory powers, on behalf of the Business Secretary, to directors of dissolved companies.
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