What will happen with those who abuse the Government-backed COVID financial assistance loans?  This is a question I am being asked regularly and the following release from The Insolvency Service may provide the answer.

“Raashid Khan (26) has been disqualified as a director for 12 years after fraudulently claiming £50,000 through the Bounce Back Loan Scheme (BBLS) before transferring the full amount out of the company’s account to himself just days before his company went into administration.

Khan, from Birmingham, was director of Ikandy Wholesale Ltd, which bought and sold bulk goods, including fireworks and fresh meat.

Despite Ikandy Wholesale’s company accounts being frozen after it was confirmed the company was to be shut down, Khan forged a document to convince his bank that the winding up order had been revoked. This allowed him to transfer around £70,000 out of the account, including a £50,000 Bounce Back Loan, which he had secured less than two weeks previously.

Since February 2021, the Insolvency Service has successfully petitioned the Courts to wind up five limited companies that have been involved in abusing government loans, introduced to help businesses during the pandemic.

These include a furniture retailer in Manchester, and two Glasgow-based companies, for which no legitimate business activity was identified since at least January 2020.

Two of the companies secured Bounce Back Loans, at least one of which was procured based on false information. One of the Glasgow-based companies also secured two Coronavirus Business Interruption Loans totalling £240,000 based on false information.

Dave Elliott, Chief Investigator at the Insolvency Service, said:

‘The Bounce Back Loan scheme was made available to help support businesses during the pandemic. It is outrageous that some directors have been trying to abuse this support, and the action we have taken shows we take this issue extremely seriously.

I urge anyone who suspects a company has been involved in this kind of abuse or has information about directors fraudulently obtaining Covid business support, to alert us immediately’.

The Insolvency Service will also soon have extra powers to investigate Bounce Back Loan fraud in cases where the company has been dissolved.

The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, currently before Parliament, if passed will give the Insolvency Service powers to investigate, and if appropriate take action to disqualify directors of companies which have fraudulently claimed Bounce Back Loans, but which have since been dissolved. This power will be retrospective to allow conduct that took place before the law comes into force to be investigated.

If wrongdoing or malpractice is found, directors can face sanctions including a ban of up to 15 years, and potentially criminal prosecution.

If you suspect a business or company director has behaved fraudulently and abused government loans, you can report it to the Insolvency Service.

Notes to editors

Misconduct: information on companies and directors

 

Raashid Khan is from Birmingham and his date of birth is August 1995. He was director of Ikandy Wholesale Ltd (Company number 09908283).

Global Trading Europe (GTE) was based in Leicester and sold furniture from premises in Manchester under the trading name ‘Unique Homes’. The company had not in fact traded since early 2019. Company director Dariusz Zemanczyk, from Poland, claimed a £50,000 Bounce Back Loan based on fraudulent company accounts. GTE was wound up by the High Court in Manchester on 16 March 2021.

Balgownie Wholesale Distribution Services Ltd based in Glasgow, obtained two Coronavirus Business Interruption Loans totalling £240,000 by provision of false and misleading information. MGH Properties Ltd, also based in Glasgow, obtained a Bounce Back Loan of £50,000. The Insolvency Service investigation identified numerous connections between the companies and the fictitious transactions shown in the bank statements that were produced to prospective lenders. Balgownie’s website stated that it provided services which include distribution, international logistics, and wholesale and that it was a leading international supplier of high-quality stock to the trade and public. However, the website content appeared to have been cloned from that of a reputable company. It was wound up by the Court of Session in Edinburgh on 1 April 2021. MGH had previously operated as a hotelier but ceased involvement in that activity in approximately January 2020. It was wound up by the Court of Session in Edinburgh on 1 April.

In February 2021 Liquor World (Scotland) Ltd (company registration number SC472891) was wound up in the Court of Session in Edinburgh having obtained loans based on false and misleading information, including a £50,000 Bounce Back Loan.

Also in February 2021, Fortress Restructuring Ltd (company registration number SC595429) was wound up in the Court of Session in Edinburgh after an investigation found that the company had obtained a £50,000 Bounce Back Loan based on false and misleading information. The investigation also found examples of misleading marketing material around the company’s insolvency-related services.”

The above actions clearly demonstrate investigations into COVID support malpractice are being done and directors who believe this is relevant to them ought to look on how they can restore the position.

Should you have an insolvency-related issue then please contact me at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to garypettit@pbcbusinessrecovery.co.uk or access our website at www.pbcbusinessrecovery.co.uk