Covid loan abuse strike-offs double in a year
The number of company directors struck off for wrongfully claiming covid loans has doubled over the last financial year, according to law firm Bexley Beaumont.
The firm used data from the Insolvency Service to find that 312 people had been disqualified from holding a company director role during the current financial year, compared to 141 in the previous 12 months.
The number banned for covid loan abuses amounts to almost half of all director disqualifications since March 2022.
Read more: Covid loans fraudulently used to buy houses, cars, and pornography
A company director can be referred for disqualification by the Insolvency Service, the Competition and Markets Authority, Companies House, a court, or an insolvency practitioner if they are suspected of not meeting their legal responsibilities.
Thousands of business owners have been found to have misused the proceeds of the bounce back loan scheme (BBLS) and coronavirus business interruption loan scheme (CBILS) to make personal purchases over the course of the pandemic.
Recent government figures suggest £640m-worth of loans issued via the BBLS were claimed fraudulently.
“It will no doubt hearten taxpayers and company directors who behave in a perfectly legitimate fashion to see that action is being taken against wrongdoers,” Bexley Beaumont finance litigation partner Phil Sheard said.
“Even so, it’s only when businesses collapse that the Insolvency Service is able to determine whether Covid loans have been used improperly. By that point, the loans may have been spent and the task facing liquidators of trying to secure repayment from directors who might also have no discernible assets is almost like trying to get blood from a stone.
“I suspect that what we’ll be seeing in the future are more disqualifications but fewer recoveries of any meaningful cash.”
Read more: Starling CEO admits bounce bank loans ‘not performing’