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Government cracking down on abusers of Bounce Back Loans

Government cracking down on abusers of Bounce Back Loans
Four people have been banned from being company directors following investigations that found that a combined £99,000 worth of Bounce Back Loans had been misused.
An Insolvency Service investigation found that 38-year-old Rafael Scher, the sole director, used N&S Solutions to apply for a Bounce Back Loan of £30,000 on 15 May 2020. This was despite the fact the cleaning company was insolvent and had ceased trading, meaning there was no prospect of repayment of the loan.
Scher used the £30,000 loan to pay £29,940 to a single trade creditor, but ignored other creditors with sizable debts, and also the company’s tax liabilities of over £94,000. He was disqualified from acting as a director for nine years.
Mujeebullah Khan, 34, and Muhammed Omair Javaid, 33, ran Chunky Chicken, a Nottingham takeaway until December 2019, when they sold it.
However, Khan improperly applied for a government-backed Bounce Back Loan of £50,000 in the business’ name after the sale of the company. The money was used to repay a business creditor and who was also a relative of Javaid.
Both Khan and Javaid made themselves bankrupt on 24 May 2021, citing debts of over £200,000 that included the Bounce Back Loan. Both received eight-year bans.
In the third case concerned publican Malcolm Wilks, 57, who ran the Royal Oak in Nuneaton. At the start of the pandemic, in March 2020, the pub closed for lockdown and Wilks entered into an Individual Voluntary Arrangement (IVA) and began to claim Universal Credit. The pub later reopened and traded for a few hours a week until it finally closed in November 2020 due to the reintroduction of Covid-19 restrictions.
On 11 November 2020, Wilks received a Bounce Back Loan of £19,000. A day later, the supervisor of his IVA terminated the agreement, and confirmed to the Insolvency Service that Wilks had only made two repayments.
As a result of the Insolvency Service investigation, it was established that Wilks transferred nearly £17,000 of the Bounce Back Loan into his personal bank account. From there, he paid over £4,100 to his ex-girlfriend and spent £1,120 on online gambling. Nearly £3,500 was withdrawn in cash and cannot be accounted for. Only £6,500 was allocated as wages for himself to cover the period when he wasn’t working.
Separately, Wilks also received £1,100 in business rates refunds in December 2020, just weeks prior to declaring himself bankrupt. He received a further £10,500 in subsequent weeks but failed to disclose this to the Official Receiver.
On 27 September 2021, he signed a bankruptcy restriction undertaking that extends the duration of his bankruptcy for eight years, starting on 18 December 2021.
Alan Draycott, the Deputy Official Receiver, said: “The Government loan schemes have provided a lifeline to millions of businesses across the UK – helping them to continue trading during the pandemic and protecting millions of jobs. As these three cases show, the Insolvency Service will not hesitate to investigate and use our powers against those who abused the Covid-19 support schemes.”
All directors have a duty to ensure their companies maintain proper accounting records. The use of a Bounce Back Loan must be for the benefit the business and never for personal use. Failure to account for how a Bounce Back Loan was used, or using it for personal payments, can result in being disqualified as a director or the extension of bankruptcy restrictions.
The Bounce Back Loan (BBL) scheme ran to March 2021 and provided loans of up £50,000 to help businesses survive the impact of the pandemic.

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