Insolvency service cracks down on Covid loan abuse

31 October 2024

The Insolvency service have recently issued a number of articles highlighting their focus on sanctioning those who are found guilty of Covid loan misconduct – those who deliberately abused Covid support during the pandemic, when the correct and timely allocation of public funds was most needed by genuine businesses.

Bankruptcy Restrictions Orders (“BROs”) and Bankruptcy Restrictions Undertakings (“BRUs”) are on the increase

Bankruptcy Restrictions Orders (“BROs”) and Bankruptcy Restrictions Undertakings (“BRUs”) have been secured against various individuals in measures that form part of the Insolvency Service’s ongoing work to target Covid loan abuse.

Director disqualifications and bankruptcy restrictions issued

In 2023-24, 757 director disqualifications and 69 bankruptcy restrictions have been secured relating to Covid financial support scheme abuse. The BROs and BRUs that have been secured to date in 2024 relate predominantly to individuals that were declared bankrupt in 2022 & 2023.

These individuals often made false or misleading applications for Bounce Back Loans, including overstating the income of their businesses, or not actually trading when they received the funds, with one individual, for example, receiving up to £36,000 more than they were entitled to.

Significant consequences of BROs and BRUs

The BROs and BRUs place significant restrictions, that remain in place for substantial periods, on the individuals whose conduct has been considered to be dishonest. These restrictions prevent individuals from:

Acting as a director of a company, or forming, managing, or promoting a company, without prior permission from the Court,
Carrying on business using a different name, without telling people you do business with the name (or trading style) under which you were made bankrupt,
Attempting to borrow more than £500 without declaring that you are subject to restrictions,
Being a trustee of a charity or any pension schemes,
Working in various posts in education or the health industry,
Holding posts in some public authorities, or in similar organisations.

What next? Key takeaways

Tackling Bounce Back Loan abuse is a key priority for the Insolvency Service, which will continue to act against those who fraudulently applied for these loans during the pandemic.

The Insolvency Service are to continue this focus, and with the help of the wider insolvency community, will increase the clampdown, with more significant fines, and in some cases prison sentences, if misconduct is proven.

The consequences are now more severe and can have a longer-lasting effect on those who abuse the system. The Insolvency Service are continuing to focus its efforts on investigating these offences, with additional funding having been received to tackle the misuse.