Bounce Back Loan Fraud – First Successful Criminal Prosecution

In April, we wrote about the Government’s intention to target delinquent directors who had abused the Bounce Back Loan.  The Insolvency Service has recently reported the first successful criminal prosecution of a Bounce Back Loan Fraudster.

A Director has pleaded guilty to charges of fraudulently claiming Covid-19 financial support.  These particular charges were brought under the Companies Act 2006 and the Fraud Act 2006.

The key facts here are:

• A Director set up a short lived company in January 2020 to operate as a pizza takeaway in Manchester
• In June 2020, the Director made an application to dissolve the Company
• However, two weeks after making the application to dissolve, the Director made a successful application for a Bounce Back Loan of £20,000, without disclosing to the Bank the fact the Company was in the process of being dissolved. The loan declaration made by the Director stated that the company would be able to make repayments.
• The Director then compounded this by using £6,000 of the loan monies to purchase a car for himself and sent £14,000 to his family abroad.

The Director appeared at Manchester Crown Court on 24 June 2022 and was sentenced to 24 months imprisonment.  He was also disqualified from acting as a Director for 7 years.

Here are the links to the Insolvency Service press release and the BBC News report of the case:

https://www.gov.uk/government/news/bounce-back-loan-fraudster-jailed

https://www.bbc.co.uk/news/uk-england-manchester-61957126

This is of course a pretty blatant example of fraudulent behaviour.  Whilst this is the first successful prosecution and in view of the estimated widespread scope of Bounce Back Loan abuse, the Government’s determination to investigate and challenge all such cases, we can be sure that more prosecutions will follow.

Not all cases will be outright fraud resulting in criminal prosecutions.  A combination of existing and new legal powers (discussed in our two articles in April which can be found here exposes Directors to investigations of dissolved or liquidated companies where Bounce Back Loan balances remain unpaid.  Whilst not out and out fraudsters, some Directors may come under scrutiny and possible civil recovery proceedings for ill-judged decisions to take Bounce Back Loan monies out of a company for personal use. 

If you have clients who have already struck off their companies or are thinking of making a striking off application where Bounce Back Loans are outstanding, we can review the circumstances and highlight any areas where a Director might be at risk of future proceedings.

If you would like to discuss a client matter in more detail, please contact Matt or Andy.