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October was another busy month for Bounce Back Loan Scheme-related news. Here’s a recap of the month’s stories.
As we’ve been reporting, the Insolvency Service’s recent press releases have been awash with director disqualifications and bankruptcy restrictions related to misuse of the Bounce Back Loan Scheme (BBLS).
October was another busy month for such news. Here’s a roundup of what was announced.
Our first story actually broke on the last day of September.
Southampton-based director, Marian Daniel Clipici, has been banned from running companies for seven years for “failing to keep adequate accounts while his business was trading.”
The Romanian national appears to have been involved in a number of companies including a food shop and a construction business, Dahlial Limited. Dahlial Limited traded from November 2017 to September 2021, before going into liquidation, which led to an Insolvency Service investigation after the liquidator “identified a number of concerns”.
At the point where the company entered insolvency proceedings, Dahlial Limited owed £60,396, including more than £7,000 in unpaid tax and £40,000 against a Bounce Back Loan (BBL). Clipici’s lack of record keeping meant he was unable to prove that the company was eligible for the loan, nor could he explain satisfactorily that the loan funds were used to benefit the business. Clipici withdrew £30,000 from his business’s bank account in the four months following the Bounce Back Loan payment in May 2020, with no evidence that the money was used to pay “subcontractors and business expenses”, as he claimed.
As well as the BBL irregularities, “Clipici was unable to account for more than £530,000 paid into the business bank account” over a two-year period and for a similar amount of outgoings.
Lawrence Zussman, Deputy Head of Insolvent Investigation at the Insolvency Service, said: “Maintaining adequate company accounting records is a statutory requirement for all directors, and is vital to ensure company transactions are legitimate.”
In a similar case, Abul Kalam, from Birmingham, has been disqualified as a director for seven years, as he was unable to explain his Pembroke restaurant’s income and expenditure totalling more than £400,000.
The bank account for his company, Choose Chilli Ltd, showed income of £178,000 and outgoings of £241,000 between December 2019 and July 2021. Kalam was unable to produce “adequate invoices or records to verify the amounts”, with the large sums of money appearing particularly suspicious as the period included Covid restrictions and lockdowns which would have impacted his restaurant, Mehfil’s.
In addition to the £178,000 mentioned, Kalam successfully applied for a £25,000 Bounce Back Loan in 2020 and a £10,000 top-up in March 2021. The forty-eight-year-old was unable to demonstrate that the loan funds had been used to benefit his business. The loans were part of around £70,000 the company owed when it went into voluntary liquidation in July 2021.
Businesses were able to borrow up to a quarter of their 2019 turnover (capped at £50,000) under the Bounce Back Loan Scheme.
Monica Coyle, from Kilmarnock, ran a health and wellbeing company – Positive Pulse Limited – during the Covid pandemic, offering “health checks to employees of businesses.” She received a £30,000 Bounce Back Loan after falsely declaring the company’s turnover as £130,000 in her application – a 2,500% increase on the true figure of £5,000.
Additionally, more than £26,000 of the loan was spent “on personal use.”
As a result, Coyle has received a ten-year ban from holding company directorships.
Insolvency Service Investigation Manager Steven McGinty said that Coyle “exploited the [Bounce Back Loan] scheme and took taxpayers’ money during the pandemic which she knew she was not entitled to.”
Similarly, Vicki Holland and Darren Trutt, from Harlow in Essex, have been disqualified for nine years and seven years respectively for overstating the turnover of their business, Crepe Heaven Ltd, when applying for a £20,000 Bounce Back Loan.
Holland claimed that the company’s turnover in 2019 was £100,000 – more than seven times the actual amount of £13,000.
As co-director, Trutt has been banned “for his part in allowing Crepe Heaven to overstate its turnover on the BBL application.”
The longest ban on this month’s list is reserved for a property director who obtained three Bounce Back Loans and used the funds to purchase a house, which he then sold on, pocketing the cash from its sale. Brendan Gaughan has received a director disqualification of twelve years, as a result.
Gaughan was director of Gaughan Group Ltd, Gaughan Property Ltd and Rentl Property Ltd, all incorporated in February 2020. The companies did not start trading until April 2020, meaning they were ineligible to receive funds under the BBLS, which required companies to have been trading on 1st March 2020.
Despite that, Gaughan was able to take out Bounce Back Loans for each of his three companies. The three loans totalled £135,000.
The Glaswegian moved all the funds into one account and bought a property worth around £160,000 with the money. Less than a year later, in March 2021, he sold the same property for around £140,000, and transferred to his personal account £100,000 of the proceeds.
Steven McGinty, Investigation Manager at the Insolvency Service said: “Bounce Back Loans were made available for trading companies adversely affected by the pandemic. Brendan Gaughan should have known his companies weren’t entitled to the loans, yet he took them anyway and used the funds for personal gain.”
Finally this month, Keysholders Ltd has been wound up by the High Court for abuse of Covid-19 support schemes including Bounce Back Loans.
Applications were made on behalf of the company – not always successfully – to the Job Retention Scheme and the Coronavirus Business Interruption Loan Scheme, as well as the BBLS.
The company did obtain a Bounce Back Loan of £40,000 in May 2020, having stated its 2019 turnover was more than three times the actual amount (£200,000 instead of £65,000). The firm had been dormant since March 2019, too, therefore it was ineligible for the scheme in the first place.
By August 2020, Keysholders’ 2019 turnover was further inflated to £550,000 (more than eight times the true figure) in the next – unsuccessful – application, this time to the Coronavirus Business Interruption Loan Scheme for £250,000.
A few months later, the company obtained a grant of £20,000 through the Job Retention (‘furlough’) Scheme. Employment contracts show that the staff member this grant related to was employed after the date that would have made them eligible for the scheme, however.
The sole director when Keysholders Ltd was wound up in June 2022 (the case has only now been publicly reported by the Insolvency Service) was Olayinka Adediran.
The Official Receiver has been appointed Liquidator of the company.
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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