In the week commencing 09/09/24, the Insolvency Service disclosed details of a director who fraudulently secured two COVID Bounce Back Loans, amounting to a combined sum of £100,000. The director, Stanislav Genadiev, managed to obtain these loans under two different companies and used the funds to pay off his personal debt, which was a direct violation of the scheme’s terms.
The COVID-19 pandemic undoubtedly caused widespread financial difficulties for many companies across various sectors. To help alleviate some of these struggles, the government introduced several support schemes, including the Bounce Back Loan Scheme (BBLS).
The BBLS was specifically designed to offer fast and easy access to loans, enabling companies to secure funding that could be used to benefit their business during such a challenging time. However, as with many schemes, there were instances of abuse, where company directors obtained loans and then failed to use the money for the company’s benefit. Instead, they diverted the funds for personal use or other illegitimate purposes.
This abuse of the BBLS has had significant consequences. Director disqualifications have notably increased, with the Insolvency Service disqualifying as many as 831 directors in 2023. This marks an 80% rise from the figures recorded in 2022.
The surge in disqualifications is mainly because the Insolvency Service can only investigate allegations of abuse once a company enters into an insolvency process, leading to an increase in cases surfacing over time.
On 9 September 2024, the courts ordered Mr Genadiev to repay £56,948 of the two Bounce Back Loans he fraudulently secured for his two companies. Should he fail to repay this sum, Mr. Genadiev faces an 18-month prison sentence.
Investigations revealed that Mr Genadiev had submitted false information when applying for the loans, overstating the turnover of both companies. Under the BBLS terms, companies could borrow up to 25% of their turnover, with a cap of £50,000 per company. However, Mr Genadiev falsely claimed his companies had turnovers of £200,000 each. In reality, one company’s turnover was estimated at only £85,000, and the other was not trading at all by March 2020.
The Insolvency Service is responsible for investigating and handling allegations of misconduct by company directors, typically following a complaint or clear evidence of inappropriate behavior. With director disqualifications on the rise, it is critical for directors to understand and uphold their duties.
Our insolvency team at Farleys is here to provide advice on pre-insolvency concerns or post-insolvency investigations. To discuss your situation confidentially, please call 0845 287 0939 or contact us by email.
