The adage ‘there is no such thing as a free lunch’ rings true for the 831 company directors disqualified in 2023/24 for abusing the Covid financial support scheme. 

The disqualifications resulted from the Insolvency Service’s continuing investigation into misuse of the Government’s Bounce Back Loan Scheme, a scheme rolled out during the global pandemic which provided small businesses with access to Government guaranteed low interest loans of between £2,000 and £50,000. As has been widely reported, these loans were exploited by some for purposes incompatible with the requirement that they be used for the benefit of the business. In many instances the Insolvency Service found that directors had applied for multiple bounce back loans on behalf of companies, overstated annual turnover to secure larger loans, and transferred the borrowed money into unconnected company accounts and/or personal accounts for personal use. 

The Insolvency Service’s Chief Investigator, Ms. Julie Barnes, emphasised: 

“The Insolvency Service will not hesitate to take action against those who so flagrantly steal from the public purse.” 

The disqualifications correlate to an 80% increase on the previous year, which signals that the Department for Business and Trade has its sights set on addressing this type of misconduct. 

Those disqualified are registered on Companies House as a disqualified director and prohibited from: 

  • acting as a director of a company;
  • taking part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership; and
  • being a receiver of a company’s property.

Their activities are also restricted in respect of working for charities, schools, pension trustees, police, social landlords, health boards and social care bodies, and legal professionals. It is to be noted that the average length of disqualification in these cases was just shy of 10 years. 

The above statistics indicate that the Insolvency Service is clamping down on directors who abused the Covid support schemes, with the 2023/24 figures bringing the total number of director disqualifications since 2021 for Covid support scheme abuses to 1,430. Other forms of enforcement action include companies being wound up, criminal convictions and compensation orders and there have been a few examples of such actions successfully being taken by the Insolvency Service in the last twelve months in respect of Covid support scheme abuses. Indications are that there may be more to come.