NEW INSOLVENCY SERVICE POWERS USED FOR THE FIRST TIME
Released On 25th Aug 2022
The Insolvency Service has used its new powers to crack down on Covid loan fraud for the first time, it has been revealed.
This has been done by banning Directors who dissolved their businesses to avoid making repayments on Government-backed loans.
New legislation was brought in last December that gave the Insolvency Service the power to investigate and sanction Directors who abused a loophole in the system to defraud their creditors.
Before the new law came in, Directors could simply close down their firms and then start up an almost identical business to avoid paying their creditors, who often included HM Revenue & Customs (HMRC).
However, under the new legislation, the Insolvency Service has the right to investigate Directors without a formal insolvency process.
As well as this, they can ban individuals who dissolve companies to avoid repaying Government-backed loans from acting as company Directors for up to 15 years.
Previously, the Insolvency Service’s remit was limited to formal insolvency processes, such as court-led winding-up orders, administration, or liquidation.
Between March 2021 and May 2022, at least 162 Directors were disqualified for abusing Covid support programmes.
Meanwhile, in recent weeks, according to Business Minister Lord Callanan, three Directors have been banned for dissolving their companies to avoid repaying their Bounce Back loans.
These include a plumber, who received a 10-year ban for a fraudulent Bounce Back loan, and another who was banned for 12 years after taking out a Bounce Back loan during the pandemic, despite his business having ceased trading at the end of 2019.
For help and advice on related matters, please contact our Insolvency Director and Appointment Taker Richard Warwick today.
