The Bounce Back Loan Scheme (BBLS) was a lifeline for many businesses in the early days of the COVID-19 pandemic, offering vital financial support for companies impacted by the lockdowns. However, allegations of misconduct relating to use of the scheme have been a common cause of director disqualifications in the years since.

JMW Solicitors’ Simon Gerrard was able to support the director of a company in avoiding disqualification after successfully proving that the funds from the scheme had been used appropriately, and in accordance with professional standards and guidance.

Why Was the Client Accused of Misusing the BBLS?

The BBLS was set up to provide small and medium-sized businesses with an option to borrow between £2,000 and £50,000 at a low interest rate, guaranteed by the government. However, due to the exceptional circumstances surrounding the scheme, the regulations surrounding the use, accounting and repayment of these funds are extremely stringent.

Our client was the director of a company that had entered insolvent liquidation. He was issued a notice under section 16 of the Company Directors Disqualification Act 1986 from the Secretary of State, announcing an intention to commence court proceedings seeking a disqualification order of 15 years for his alleged conduct as the sole director of a company which had obtained a loan under the BBLS.

It was alleged that:

1. The insolvent company did not meet the criteria to obtain the Bounce Back Loan and, thus, the director obtained it under false pretences, and;
2. The director had not used the monies from the Bounce Back Loan towards the proper operation of the insolvent company’s affairs.

In particular, the Secretary of State took issue with the turnover included within the Bounce Back Loan application - the amount included being £200,000, which triggered an advance of the maximum amount allowable under the BBLS.

Due to the perceived abuse of a government-backed scheme that was introduced at a time of unprecedented crisis, the Secretary of State was of the view that the conduct of the director was sufficiently egregious to merit disqualification for the maximum period under the Act.

How JMW Helped

Simon and the Restructuring and Insolvency team at JMW contested the notice based on significant evidence that the director had acted on the advice of professional advisors when interpreting the scheme. The actual turnover of the insolvent company for the prior financial year was proven to be around £100,000; the director had included the insolvent company’s estimated turnover for the next financial year in his application, and had acted honestly and reasonably in doing so, based on the advice of his accountants. The evidence also demonstrated that, in fact, the monies from the Bounce Back Loan had been used to meet proper company expenses.

The Outcome: Withdrawal of the Case

As a result of JMW Solicitors' detailed case preparation and representation, the Secretary of State withdrew the notice of intention to seek a director disqualification order. This meant that our client was not only able to continue acting as a company director, but also avoided the severe personal and professional consequences that a disqualification would have caused.

A director disqualification order can have serious implications for an individual’s career, financial standing and reputation. By successfully demonstrating that our client had acted in good faith and in accordance with professional guidance, we prevented these long-term ramifications, allowing them to continue their business career without restriction.

This case highlights the value of seeking legal advice as early as possible when faced with a director disqualification notice. Allegations of BBLS misuse are being scrutinised more closely than ever, and the right legal strategy can make all the difference in preventing disqualification proceedings before they begin.