Insolvency Service drops director disqualification probe over alleged COVID loan fraud

A director instructed Suky Mann in relation to a director disqualification investigation commenced by the Insolvency Service after the liquidation of his limited company in 2024.

The background to the case

The allegations centred on the company’s application for a Bounce Back Loan (“BBL”) and the director’s alleged misconduct in overstating the company's turnover on the application form to obtain a larger BBL than the company was entitled to.

Suky, assisted by Kate Woodhouse, an Associate in the restructuring & insolvency team, successfully argued that the director’s measured and diligent approach was sufficient to justify that the investigations against the director should be dropped.

The challenge

It was alleged that the director overstated the company’s turnover, thereby breaching the eligibility criteria for the BBL application. The Insolvency Service stated that by doing so, a 10-year disqualification ban was warranted.

Suky, however, took a different approach and successfully argued that the director took reasonable and responsible steps to determine the loan amount that the company was entitled to. Suky was able to evidence the director’s diligence in seeking professional advice in calculating the company's turnover, and that the director relied wholly on the advice obtained when making the application. In doing so, the director had acted in good faith, and the Insolvency Service could not argue that the director had breached his fiduciary duties.

Based on the representations submitted by Suky, the Insolvency Service had little choice but to concede that it was not in the public interest to pursue a ban against the director.