Director scrutiny over covid loans

Closing an insolvent business is a horrible experience but disqualification from being a director is even worse.

In a recent case in the North of England the director of a retail business was disqualified for 11 years after it was concluded that he had overstated his turnover when claiming a Covid Bounce Back loan.

The regulations state that eligibility for a loan was in doubt given that they should be for less than 25% of the previous year’s turnover.

It appeared that the business had already ceased trading the previous year but insolvency officials said he should have known that turnover had been insufficient to qualify for the loan, which was paid out in May 2020.

It also found that he had failed to provide sufficient records to establish what the funds were used for.

This situation emphasises the duties on directors to not only keep accurate and detailed financial records but also to ensure they comply with all their duties when applying for a Covid-related BBLS or CBILS...

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Directors’ duties and liabilities survive insolvency – a new court ruling

A recent High Court ruling on directors’ duties after insolvency has said that they cannot buy assets from their liquidated companies at below market value.

The ruling was made after solicitors for the company’s second liquidator who took over the case, Stephen Hunt, argued that Brian Michie as former owner and director of the construction company, System Building Services Group Ltd, had “unfairly bought a two-bedroom house from the original insolvency practitioner involved for £75,000 less than it was worth, 18 months after his company went out of business”.

The company went into administration in July 2012, and then into a creditors’ voluntary liquidation in July 2013 following which Mr Michie bought the property in Billericay, that was owned by his company, for £120,000 in 2014 from the previous liquidator Gagen Sharma.

The case revolved around whether director’s duties survived the insolvency of a company and specifically those...

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