Company directors banned for Bounce Back Loan (BBL) fraud

directors banned for Bounce Back Loan fraud

Company directors banned for Bounce Back Loan (BBL) fraud

Two company directors have received a ban totalling 21 years after fraudulently claiming £100,000 in bounce back loans (BBL).

Following an investigation by the Insolvency Service, Aamer Aslam from Huddersfield and Razwan Ashraf from Keighley were disqualified for 11 and 10 years respectively.

The duo were co-directors of Scholars Academy Ltd, a specialist tuition centre for children in West Yorkshire.

BBL Fraud

In May 2020, Aslam applied for a BBL by providing an estimated company turnover of £200,000. Scholars received the loan of £50,000 but went into voluntary liquidation in January 2021, triggering the investigation

At the time of liquidation, the directors listed the company’s liabilities to the bank as £7,000. However, the bank later notified the liquidator that it was owed £50,000 by the company due to the BBL.

The investigation found that the duo was inflating the company’s turnover. Scholars’ bank statements show a maximum monthly income of just £640, which means their turnover was only £7,680 and did not meet the criteria to apply for a BBL.

It was found that Aslam and Ashraf used the money to make monthly payments to four family members of Ashraf. All four received £2,000 a month after the duo received the loan money.

Aslam and Ashraf told the Insolvency Service that these payments were genuine business expenses, but were unable to provide evidence to support this.

Alongside this, Ashraf was also the sole director of another educational company, Progress First Ltd. In May 2020, he applied for a BBL and fraudulently declared in his application that the annual turnover in 2019 was £200,000 when Progress’ bank statements showed that turnover was £38,973.

This resulted in Progress First Ltd receiving the full loan of £50,000 when it should have been entitled to a loan of £9,927.

Ashraf claimed that the money was used to pay for company expenses. However, regular payments were made to three individuals, and there was no evidence to show that these payments were genuine business expenditures.

Ashraf has since repaid £35,000 to the liquidator to settle claims against him for the Progress loan and a further £25,000 in settlement of claims against both directors for the Scholars loans.

COVID crackdown

This is the latest in several bans issued by the Insolvency Service against directors who have misused the COVID support schemes.

The Insolvency Service have new powers to investigate, disqualify and potentially prosecute directors who abuse the company dissolution process.

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act will also help tackle directors dissolving companies to avoid repaying Government-backed loans taken out during the Coronavirus pandemic.

Under the Act, the Insolvency Service, on behalf of the Business Secretary, will investigate and tackle ‘unfit’ directors who place their firm in administration to avoid paying subcontractors and suppliers.

If misconduct is found, directors can face sanctions, including disqualification as a company director for up to 15 years, or in the most serious of cases, prosecution.

The Business Secretary can apply for a court order that requires a disqualified director of a fraudulently dissolved company to pay compensation to creditors who have lost out due to their actions.

In addition, the Insolvency Service can investigate live companies where there is evidence of wrongdoing, such as misuse of COVID support.

Are you looking for BBL advice or guidance whilst navigating the post-pandemic business economy? Give us a call on 020 7724 6060 or send an enquiry here.

Link: Bans for two directors who abused Bounce Back Loan scheme