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A recap of February 2023’s Bounce Back Loan Scheme-related stories.
February has been unusually quiet for news and announcements related to the Bounce Back Loan Scheme (BBLS), compared to recent months (as we’ve been reporting).
The Insolvency Service published only two press releases on the topic, announcing the jailing of a BBLS fraudster on 15th February and a director disqualification a couple of days before.
Bounce Back Loans were also mentioned in the latest issue of the Insolvency Service’s Dear Insolvency Practitioner (‘Dear IP’) released on 7th February (although dated January 2023).
All three updates are covered below.
Middlesex-based Kulwinder Singh Sidhu has been handed a twelve-month prison sentence for his abuse of the Bounce Back Loan Scheme in June 2020.
Sidhu obtained the maximum £50,000 loan under the scheme after applying on 9th June 2020, through his haulage company Wavylane Ltd. Less than three weeks later, Sidhu filed to dissolve the business, “having transferred the funds to his personal bank account within two days of receipt.”
In dissolving Wavylane Ltd, based in Stanwell, Sidhu failed to notify the Bounce Back Loan lender – a criminal offence.
In October 2020, when the company was dissolved, the Insolvency Service discovered that Sidhu had exaggerated his company’s turnover in order to acquire the maximum loan amount, along with the transfer of the funds – first to Sidhu’s personal account and then “to his son and another company.”
Sidhu was sentenced to twelve months in prison on 13th February at Guildford Crown Court, having pleaded guilty to charges under the Fraud Act 2006 and the Companies Act 2006 on 19th December 2022.
About the case, Julie Barnes, Chief Investigator at the Insolvency Service said:
“Any other company directors who might be tempted into dissolving their business to try to keep public money they are not entitled to, should be aware they are risking a lengthy prison term.”
The fifty-eight-year-old also received a six-year director disqualification and a confiscation order for the full value of the loan, which he has paid in full.
Barnes added: “Our action has ensured repayment of the loan money and taxpayers have not been left out of pocket.”
Thomas Whyte also obtained a £50,000 Bounce Back Loan, stating that his company Fortress Restructuring Ltd had an annual turnover of £250,000.
Fortress Restructuring was liquidated and it was revealed that the company “had no trading address [and] had never traded”. In the year before Whyte made the loan application, “less than £1,000 had been received into” the business’s bank account.
Additionally, once Whyte was informed that the Secretary of State for Business had petitioned for the company to be wound up, “the balance on the company bank account reduced from £28,150 to a little over £1,590” in the space of twelve days, with payments made to Whyte among others.
The fact that Fortress had filed dormant accounts, and only £949 had passed through its bank account should have made it abundantly clear to Thomas Whyte that his company was not entitled to a £50,000 loan, yet he took it anyway and used the majority of that money for his own benefit.
The company’s liquidator – Bill Cleghorn of Aver Chartered Accountants – has recovered £37,500 of the £50,000 owed.
Rob Clarke, Chief Investigator at the Insolvency Service, said:
“The fact that Fortress had filed dormant accounts, and only £949 had passed through its bank account should have made it abundantly clear to Thomas Whyte that his company was not entitled to a £50,000 loan, yet he took it anyway and used the majority of that money for his own benefit.
“We thank the liquidator for their efforts which have seen £37,500 recovered, and repeat that we will not hesitate to take action against directors who have abused Covid-19 financial support in this manner.”
Whyte has been disqualified as a director for ten years, effective from today (28th February 2023).
The Insolvency Service has published an update on Bounce Back Loans and advice to insolvency practitioners related to the reporting of BBLS misconduct in issue 157 of Dear IP (pdf).
Firstly, the Insolvency Service has started to share information about organisations that received loans and other support as part of Covid-19 schemes, with the expectation that this will “be useful in instances where this information has been difficult to obtain, or where it has been deliberately concealed from the office holder.”
Secondly, guidance has been issued to insolvency practitioners on reporting misconduct in relation to Covid-19 support schemes, with the Insolvency Service stating that “there needs to be clear evidence indicating that the corporate entity may have either made a false application, for instance inflated turnover figures for the purpose of a loan, or that the funds have not been used for a legitimate business purpose.”
The guidance continues: “When reporting suspected misconduct in respect of a Covid support scheme, office holders should do this using section 13 of the Director Conduct Report form (Finance Support Schemes) which has an option to include Covid support schemes.” This, essentially, further embeds Covid-19 support scheme misconduct as a standard part of the reporting process, as such suspected misconduct was previously reported under a more catch-all heading of ‘Other Investigations’ (section 12).
Seeing the whole picture in insolvency and debt cases is key to maximising returns to creditors. For more information on how ESA Risk can help to identify hidden assets or locate targets who have gone to ground, contact Mike Wright, Investigations and Risk Management Consultant, at mike.wright@esarisk.com, on +44 (0)843 515 8686 or via our contact form.
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