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Enhancing Public Accountability: Key Elements of the Public Office (Accountability) Bill 2025
Kirsty Cook
Question: What do Sirfraz Ahmad, Max Hadley, Lewis Wright and Jake Joynt all have in common?
Answer: They are the first four individuals to be successfully pursued by the Insolvency Service (IS) under The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 (the “Act”), for wrongly claiming Bounce Back loans (BBLS) before dissolving the companies to avoid repaying the liabilities. They are now all disqualified from acting as directors for 10 years, 10 years, 12 years and 7 years respectively as reported by the IS on 29 July 2022.
I wrote about the powers under the Act as far back as September 2021 and about fears that the BBLS loan scheme had been rife with fraudulent applications with some eye watering potential losses even further back in February 2021. So, it is unsurprising that the first reported cases of deviant directors are now being reported.
As a recap, the purpose of the BBLS and CBILS loan schemes (which closed to new applicants in March 2021) was to provide, temporary, emergency funding to legitimate SME and small businesses (which were UK taxpayers) to keep them afloat during the pandemic and stave off the threat of insolvency.
BBLS loans were aimed at the smallest of UK companies (SMEs, micro companies etc) with loans capped at a maximum value of £50,000, repayable over 6-10 years, low interest (including a 12-month initial interest free holiday), requiring no personal guarantees or other security. Cheap loans, fast. The cherry on the top? Borrowers could self-certify that they met the requirements with little to no due diligence carried out on them, approval and remittance of funds in a matter of days. For the lenders, the risk was all underwritten by a 100% government guarantee (read: UK taxpayer). In the case of both CBILS or BBLS, funds were strictly to be used for the benefit of the business.
In the cases above the directors had spent the money on themselves or their family members.
HM Treasury statistics suggest that by close of the schemes in March 2021, there were 1,560,309 approved BBLS facilities with a total loan value of £47.36bn and, for CBILS, there were 109,877 approved facilities in place with a total value of £26.39bn. Many of these are genuine loans but, figures from PWC (appointed by British Business Bank to investigate) estimate £4.9bn (+10%) of all BBLS loans are fraudulent. Whilst it has been widely reported that organised crime has exploited the schemes, I predict the majority are opportunistic directors like above.
BBLS, CBILS and other schemes were heralded as the holy grail at the time but the latest reports and figures suggest it may be better categorised as more of a poisoned chalice than the elixir of life from a UK taxpayer perspective.
Whilst a policy of deterrence and punishment for fraudulent abuse is clear (and accords with public sentiment), one must not lose sight of the fact that successful prosecutions and disqualification of directors costs money and does not automatically result in any recovery for UK taxpayers. Rather, taxpayer money will likely need to be spent seeking, for example, compensation orders against individuals. One can imagine the baton may be passed on to private insolvency practitioners to pursue through insolvency proceedings whether under existing powers or new laws enacted to make that job easier. Watch this space.
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