We write a lot about bounce back loans and fraud because the figures are, not to put too fine a point on it, staggering. 

We’ve now also got some more official data about how seriously the authorities have been treating bounce back loan scheme (BBLS) malfeasance. 

The Insolvency Service have released details of the total number of directors disqualified in the last financial year and the results are interesting. 

A total of 932 directors had been disqualified between 2022/23 which is an annual increase of 14%.

Of these 459 (49%) were disqualified for abusing the bounce back loan scheme. Further analysis shows that directors guilty of Covid-19 related misconduct are liable for longer disqualification periods with the average length of bans being seven years and four months. This is an increase from the average of five years and ten months in 2021/22. 

Dave Magrath, director of investigation and enforcement at The Insolvency Service, said: “These fraudsters are just the latest to find out that we will not hesitate to take firm action where we uncover such abuse, and this can ultimately result in a jail sentence. 

“The purpose of the Bounce Back Loan Scheme was to support businesses during the pandemic, but it is clear a minority of company directors chose to maliciously abuse the scheme and defraud the taxpayer. 

“Our team of experts continue to work around the clock to bring these criminals to justice.”

The last financial year also saw 49 companies wound up in the public interest which is similar to the previous three financial years. Additionally, 69 individuals faced criminal charges based on their actions brought by the Insolvency Service with a 100% conviction rate with two imprisonments. 

As at the end of March 2023, there were more than 6,200 former directors with active disqualifications outstanding. 

The pandemic and aftermath has also been an acid test on directors’ understanding of their statutory and fiduciary duties with a recent Supreme Court judgement – BTI v Sequana – providing a timely example. 

The crux of the case concerned what duties directors owe to creditors and shareholders at different points in time – do they have the same duties when the business becomes insolvent or when it is at the brink of insolvency?

The judgement is clear – in dismissing the appeal from BTI, the Supreme Court affirmed the existence in law of the duty to consider the interest of creditors (the creditors’ interests’ duty) and clarified that this is engaged when the directors know or ought to know that liquidation or administration is probable. 

At this stage, directors need to give appropriate weight to creditors interests and balance them against members interests. If there is a conflict then creditors interests should be paramount with more weight given the worse the company’s financial position. 

Chris Horner, insolvency director with BusinessRescueExpert, said: “Investigations into directors actions are a necessary requirement of a creditors voluntary liquidation process so they shouldn’t automatically be feared. 

“In many cases they provide the context and rationale for decisions that were taken which will explain what happened, when and why and as long as there is no criminal activity or intent then the Insolvency Service will usually accept this version if the insolvency practitioner agrees.

“It’s essential then that as many decisions taken as possible are properly documented so these can be referred to later if the business does engage in an insolvency process. 

“Keeping a close eye on the financial position of the business especially if there are any sudden downturns is an essential task for any director as is seeking out some impartial, professional advice if there are signs of potential trouble ahead.”

Of course, one of the things about trouble is that if it was that easy to spot then a lot more people would. 

It has a nasty habit of creeping up on directors and business owners unawares who sometimes only realise the seriousness of the issue when it’s too late to make any concrete changes that could affect their future path. 

This is why we offer a free consultation for anyone who needs one at a convenient time to suit them. 

One of our advisors will familiarise themselves with the situation and then be able to outline all the options that are available. 

Then they can put their own interests as directors first and act on them.