Tag: Insolvency

Rupinder Kaur Thaker has been disqualified from running companies for seven years, following an investigation by the Insolvency Service.

Thaker was the sole director of TKML Limited when it entered into creditors’ voluntary liquidation (CVL) last year, triggering the investigation.

TKML Limited was given a £45,000 loan under the Bounce Back Loan Scheme during the coronavirus pandemic, which appears to have been abused by Thaker. The loan amount was likely more than her business was eligible for, funds were transferred to her personal account and withdrawn as cash, and there is little evidence that the loan was used to support her business.

The Bounce Back Loan abuse is the headline element, as far as the Insolvency Service is concerned, as they continue their push to address the misuse of pandemic-related support schemes. However, there was much more at play in this particular case.

“More than £250,000 paid out of the company bank account remains unexplained”, as the Essex resident “had failed to preserve and/or maintain adequate accounting records or failed to deliver them to the liquidator.” And it is this lack of record-keeping that was cited in Thaker’s disqualification undertaking, effective from 2^nd August 2022 for seven years.

Additionally, there were “several inconsistencies” in Thaker’s filings for TKML Limited. The nature of business for the company was listed as ‘take-away food shops and mobile food stands’ at formation, but TKML Limited appears to have operated as a catering and décor supplier for weddings, while Thaker’s occupation is listed as a ‘publicist’. Perhaps an early indicator of the poor record-keeping that would follow before TKML Limited’s CVL.

About the investigation, Lawrence Zussman, Deputy Head of Insolvent Investigations, said: “Despite repeated requests for books and records, Rupinder Thaker failed to provide the liquidator [from Turpin Barker Armstrong] with any evidence that could have helped explain the legitimacy of the company’s financial affairs. Especially the £45,000 bounce back loan intended to support viable businesses during the pandemic.”

Insolvency and debt investigations

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)343 515 8686 or via our contact form.

You can also learn more from our Insolvency & Debt Investigations brochure.

The sole director of Al-Amir Ltd, a grocer and butcher in northwest London, has received a ten-year disqualification from running companies after abusing the Bounce Back Loan Scheme during the Covid-19 pandemic.

Abbas Abo Kifayah used the majority of a £50,000 loan as personal income, rather than on his company, with £43,200 transferred into his personal bank account. The loan was secured under false pretences, too, as Kifayah inflated turnover figures in his application.

Wembley-based Al-Amir Ltd went into creditors voluntary liquidation (CVL) in July last year, with Zain Iqbal of Cooper Young appointed as the company’s liquidator. The CVL triggered an investigation by the Insolvency Service which uncovered Kifayah’s abuse of the loan scheme.

Lawrence Zussman, Deputy Head of Insolvent Investigations, described how Kifayah “abused the government’s support when he inflated his company’s turnover in order to receive the maximum loan before squandering the money rather than use it to benefit his business.” He also cautioned: “Ten years is a significant amount of time to be removed from the corporate arena and Abbas Kifayah’s disqualification should serve as a clear warning that we will take decisive action to protect the public and the taxpayer.”

In addition to the large sum transferred by Kifayah to his personal account, he withdrew £2,250 of the loan in cash and sent around £3,000 “to a third party”. The 37 year old told investigators he used the loan “to pay his salary[,]…his backdated salary and [for] personal use.” The Insolvency Service said that “investigators could not find any evidence that any of the money was used for the benefit of the company.”

Kifayah’s disqualification undertaking was accepted on 30^th June 2022. It is effective from today (21^st July 2022) for ten years, and stops Kifayah “from directly, or indirectly, becoming involved in the promotion, formation or management of a company, without the permission of the court.”

Insolvency and debt investigations

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)343 515 8686 or via our contact form.

You can also learn more from our Insolvency & Debt Investigations brochure:

 

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The Insolvency Service has announced the latest punishments handed out to two directors who abused Covid-19 financial support.

These are two in a string of recent announcements (see News from 27^th June, 23^rd June, 22^nd June, 20^th June and 7^th June), with official data from the Insolvency Service further illustrating the extent of their work in this area over recent weeks and months.

Of the 99 director disqualification outcomes published in Q1 of the 2022/23 financial year, nearly 40% of them mention Covid-19 support schemes. The most cited pandemic-related conduct being abuse of the Bounce Back Loan Scheme (in 37 disqualification outcome summaries).

And the Bounce Back Loan Scheme (BBLS) was at the heart of Grigorijs Hacaturjancs’ ten-year disqualification announced at the end of last week. The director of online retailer Beauty&Melody Shop Ltd (not connected to a chain of salons in London with the same name) applied for, and obtained, a £50,000 loan from the BBLS in May 2020. Three issues with this application have since been highlighted:

1. The company was ineligible for the scheme as an online-only retailer, i.e. a business that wasn’t directly affected by coronavirus-related restrictions.
2. Beauty&Melody Shop Ltd had ceased trading more than a year before the application was made.
3. Hacaturjancs “inflated the company’s turnover on the BBL application in order to secure the maximum £50,000 available through the scheme.”

Furthermore, the company then made “a payment of nearly £50,000” to a Slovakian business, two weeks after receiving the loan monies. While Hacaturjancs described this as a payment to a supplier, there was no evidence that the two companies had ever done business together before, and Beauty&Melody “received no goods or services in return for the payment.”

The other case reported by the Insolvency Service on 1^st July also involved an £18,000 loan from the BBLS, as well as a £25,000 local council grant. Rathudi Mahesh Manglanand is now subject to a nine-year bankruptcy restrictions undertaking, after admitting he spent most of the funding on alcohol and gambling.

The sole trader, from Pontypridd, ran a restaurant in Cardiff, which ceased trading before the Covid-19 pandemic. This didn’t stop Manglanand from successfully applying for a £25,000 grant in April 2020 and an £18,000 loan a month later.

Manglanand told Insolvency Service investigators that “he had lost around £30,000 through gambling in the space of a year.”

The restrictions placed upon him came into effect on 20^th June 2022. Hacaturjancs’ disqualification is effective from 12^th July 2022.

In both cases, the individuals had voluntarily entered into insolvency proceedings – Hacaturjancs placed his company into voluntary liquidation in July 2021; Manglanand applied for his own bankruptcy in the same month – which triggered investigations by the Insolvency Service. The current assessment by the liquidator is “that Hacaturjancs has no personal assets”, while “the Official Receiver is assessing assets available” in Manglanand’s case.

These announcements at the beginning of July suggest that the pace of the response to Covid support scheme abuse we saw in Q1 will continue in the second quarter.

Insolvency and debt investigations

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)343 515 8686 or via our contact form.

You can also learn more from our Insolvency & Debt Investigations brochure:

 

Download your copy

 

The owner and sole director of a pizza takeaway in Manchester has been sentenced to two years in prison for fraudulently obtaining a Bounce Back Loan during the Covid-19 pandemic.

Abdulrazag Zagroba applied for a £20,000 loan under the Covid support scheme in June 2020, two weeks after applying to dissolve his company Amigo Pizza (Manchester) Ltd.

In applying for the Bounce Back Loan, Zagroba “signed the loan declaration stating the company would be able to make repayments” and he failed to tell the lender that he had started the dissolution process.

Zagroba, 54, told investigators from the Insolvency Service that he had “no intention of using the Bounce Back Loan for the business.”

Amigo Pizza (Manchester) Ltd ran a pizza takeaway in Stretford, Manchester from January 2020 until October 2020, when the business was dissolved. The loan taken out by Zagroba became due for repayments in June 2021, when the company was no longer active.

Rather than use the funding for his takeaway business, Zagroba sent £14,000 in cash to family living abroad, with friends apparently transporting the money. He also bought and insured a car.

“Covid loans were designed to support viable businesses during the pandemic. Abdulrazag Zagroba, however, cynically sought to exploit the covid loan scheme and by dissolving his company, he intended to frustrate any attempt by the lender from taking action to recover the outstanding loan.”

Julie Barnes, Chief Investigator at the Insolvency Service

Zagroba’s sentencing on 24^th June 2022 at Manchester Crown Court signalled the first successful criminal prosecution for a Bounce Back Loan fraud.

He pleaded guilty to the charges of fraud by false representation under Section 2 of the Fraud Act 2006 – which carries the 24-month prison sentence – and an aggravated striking off offence under the Companies Act 2006 (20 months’ imprisonment, to run concurrently).

As well as a two-year imprisonment, the Manchester resident has received a ban from holding company directorships for seven years.

The Insolvency Service’s Julie Barnes went on to caution that “this sentence should serve as a warning to others who engaged in this behaviour, and they should come clean and repay the money before it is too late.”

Fraud investigations by ESA Risk

If you suspect that a fraud has occurred within your business and need advice or support on the next steps, we’re here to help.

Contact Mike Wright, Risk Management & Investigations Consultant, at mike.wright@esarisk.com, on +44 (0)343 515 8686 or via our contact form, to find out more.

Salih Ozhot, 39, has been placed under eight years of additional bankruptcy restrictions after obtaining a loan from the Bounce Back scheme for a company that had never traded.

The Official Receiver was acting as Ozhot’s trustee in bankruptcy when they found he had successfully applied for a £50,000 bounce back loan for Kangaroo Courier Services, despite the fact “the business never traded and was ineligible for government support.”

Ozhot petitioned for his bankruptcy which was declared on 13^th October 2021.

He spent £15,000 of the loan on creating a website for Kangaroo Courier Services, which was apparently formed in November 2019.

The Official Receiver, Mitzi Mace, asked for Ozhot’s bankruptcy restrictions to be extended “due to the risk he posed to creditors”.

She said that “Ozhot’s actions indicated a cavalier approach to business” after he “cynically applied for government support, intended to help viable businesses during the pandemic, for a business that didn’t even exist.”

Mace is now looking to recover the loan from Ozhot’s available assets.

Ozhot’s new bankruptcy undertaking runs from 11^th May 2022 for eight years and restricts him from becoming “a company director without the court’s permission” and “from being able to borrow more than £500 without disclosing his bankrupt status.”

The news comes a few days after the release of the latest corporate and individual insolvency statistics for England and Wales, which show a 23.3% year-on-year increase in personal insolvencies. May 2022’s 10,476 personal insolvencies is also 11.2% higher than April’s figure.

Responding to the statistics, Christina Fitzgerald, President of R3, the insolvency and restructuring trade body, noted that “wages haven’t kept pace with inflation, and many people remain very worried about how they’ll manage to afford food, fuel and energy as all three of these necessities become increasingly expensive.

“People’s finances have been affected by the economic fallout from the pandemic, and combined with the increased cost of living, there are potentially a lot of people who are vulnerable to the kind of unexpected shocks that can lead to them becoming insolvent.”

While the number of corporate insolvencies decreased from April to May 2022, there was a huge 79.2% increase compared to this time last year (1,817 insolvencies in May 2022, up from 1,014 in May 2021), reflecting the current uncertainty faced by businesses in a challenging market.

Insolvency and debt investigations

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)343 515 8686 or via our contact form.

You can also learn more from our Insolvency & Debt Investigations brochure:

 

Download your copy

 

The directors of Ace Buildings and Maintenance Services Limited have been banned from running companies for 11 years, after an Insolvency Service investigation found they falsely applied for £100,000 under the Bounce Back Loan Scheme.

This is the second such announcement from the Insolvency Service in the space of two weeks – the director of a Manchester-based takeaway who abused the Eat Out to Help Out and furlough schemes was banned for seven years earlier this month.

David Harrison and Paul Hudson, from Devon, obtained a £50,000 bounce back loan in May 2020, but failed to declare that their business was in the midst of a company voluntary arrangement (CVA).

Furthermore, the directors made a second application to the scheme for another £50,000 loan, despite the fact they had already received the maximum allowance and their company was still in insolvency.

Ace Buildings and Maintenance Services Limited owed around £110,000 when it entered into a CVA in February 2020. Despite taking out the £50,000 loan, the company fell into liquidation in December of the same year “with the company stating liabilities of more than £340,000.”

That creditors voluntary liquidation (CVL) triggered an Insolvency Service investigation, which eventually led to both directors receiving disqualifications.

“11 years is a substantial amount of time to be removed from the corporate arena and their disqualifications will protect the public and creditors, while also serving as a clear warning to other rogue directors that we will robustly tackle financial misconduct”, said Mike Smith, Chief Investigator for the Insolvency Service.

Ace Buildings and Maintenance Services Limited – incorporated in June 2017 – had a short but tumultuous existence, with a winding-up petition served against the company as early as October 2019.

The company’s liquidators, KJG (part of the Xeinadin Group), are assessing ways to recover the Bounce Back Loan funds, as well as money owed to other creditors.

Smith also noted that “Bounce back loans provided a vital lifeline to help viable businesses during the pandemic. David Harrison and Paul Hudson, however, cynically applied for government support they were not entitled to when they were fully aware their company was insolvent and was not able to pay its debts.”

Harrison’s disqualification runs from 31^st May 2022, and Hudson’s ban started on 9^th June.

Insolvency and debt investigations

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)343 515 8686 or via our contact form.

You can also learn more from our Insolvency & Debt Investigations brochure:

 

Download your copy

 

Ifraz Nabi ran New York Krispy Fried Chicken on Stockport Road, Greater Manchester, until its liquidation in November 2020. The insolvency process triggered an Insolvency Service investigation which uncovered Nabi’s abuse of the government’s Cvoid-19 support schemes.

Nabi’s business claimed £30,000 through the Eat Out to Help Out scheme and more than £20,000 through the Coronavirus Job Retention (furlough) Scheme. However, there was insufficient evidence of sales made during the qualifying period and “no explanation of how such sales could have been achieved while staff were on furlough.”

Additionally, the takeaway would not have qualified for Eat Out to Help Out funding, anyway, as the scheme was for restaurants with indoor seating and New York Krispy Fried Chicken had few indoor seats and received most of its orders through food delivery apps.

On top of his abuse of the pandemic relief schemes, Nabi did not register the business for tax and liquidators “were unable to assess how much the company owed in unpaid tax”. Nabi “admitted failing to maintain, preserve or deliver up adequate accounting records, as well as failing to register and account for VAT as required”, resulting in his disqualification from holding directorships for seven years. The disqualification is effective from 31^st May 2022.

In relation to the case, the Insolvency Service’s Deputy Head of Investigations, Nina Cassar noted that “[o]ne of the main purposes of the Company Director’s Disqualification Act is to ensure that company directors adhere to minimum standards.” She warned that “the Insolvency Service will take action against those who abuse their position and do not take their obligations seriously.”

This is the latest Covid support scheme-related disqualification following an investigation by the Insolvency Service. It is no secret that millions of pounds from relief schemes were misappropriated by company directors – many more cases like this one will be uncovered as insolvency proceedings trigger further investigations in the future.

Fraud investigations by ESA Risk

If you suspect that a fraud has occurred within your business and need advice or support on the next steps, we’re here to help.

Contact Mike Wright, Risk Management & Investigations Consultant, at mike.wright@esarisk.com, on +44 (0)343 515 8686 or via our contact form to find out more.