The Insolvency Service has banned a director for nine years and increased bankruptcy restrictions for three others who abused the Bounce Back Loan scheme, which was offered to companies as financial support during the pandemic.

Bounce Back Loans were available up to March 2021 and provided up to £50,000 to help firms survive – they could only be used for business and not personal use. Failure to account for how a loan was used or using it for personal payments, can result in director disqualification or the extension of bankruptcy restrictions.

The recent Insolvency Service probe of three cases found nearly £100,000 of Bounce Back Loans had been fraudulently applied for or misused.

Insolvency Service

Cleaning company boss banned for nine years

Rafael Henrique Scher, 38, was director of N&S Solutions Ltd, a Milton Keynes cleaning business incorporated in June 2018. The company entered administration in August 2019 with debts of £150,000 and then entered liquidation on 23 June 2020.

Scher had used N&S Solutions to apply for a Bounce Back Loan of £30,000 on 15 May 2020. This was despite the company being insolvent and no longer trading, meaning it would be impossible to repay the loan.

He used the loan to pay £29,940 to a single creditor but paid nothing to others who also had large debts and in addition, the company’s tax liabilities were over £94,000. He has now been disqualified – from 25 October 2021 – from acting as a director for nine years.

Bankruptcy restrictions extended for takeaway directors

Two men who ran a fried chicken takeaway in Nottingham have had bankruptcy restrictions extended for eight years.

Mujeebullah Khan, 34, and Muhammed Omair Javaid, 33, operated Chunky Chicken until December 2019, when they sold the business. Despite this, Khan fraudulently applied for a Bounce Back Loan of £50,000 in the business name after the sale of the company. The money was used to repay a creditor who was also a relative of Javaid.

Khan and Javaid made themselves bankrupt on 24 May 2021, having debts of over £200,000 that included the Bounce Back Loan. They have now signed bankruptcy undertakings that extend their restrictions for eight years. This will result in them finding it hard to obtain credit and they will be unable to act as company directors without the court’s permission.

Nuneaton publican given eight years of bankruptcy restrictions

Malcolm Wilks, 57, had been publican of the Royal Oak pub in Nuneaton since 2014. In March 2020, the pub closed for lockdown and he entered into an Individual Voluntary Arrangement, when he began to claim Universal Credit.

The pub later reopened and traded a few hours a week until it finally closed in November 2020 because of COVID-19 restrictions. On 11 November 2020, Wilks took out a Bounce Back Loan of £19,000 and a day later, the supervisor of his IVA terminated the agreement, confirming to the Insolvency Service that Wilks had only made two repayments.

The Insolvency Service found Wilks had transferred nearly £17,000 from the Bounce Back Loan into personal bank accounts. He then paid over £4,100 to his ex-girlfriend and spent £1,120 gambling online. Nearly £3,500 was withdrawn in cash and cannot be traced. Only £6,500 was allocated as wages for himself to cover the period when not working.

In addition, Wilks received £1,100 in business rates refunds in December 2020, just weeks before he declared himself bankrupt. He received a further £10,500 in subsequent weeks but did not disclose this to the Official Receiver. On 27 September 2021, Wilks became subject to a bankruptcy restriction undertaking that extended the duration of his bankruptcy for eight years, starting on 18 December 2021.

Alan Draycott, 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.”