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Insolvency service cracks down on bounce back loan abusers

Director banned for 9 years and three further directors receive extended bankruptcy restrictions for misusing COVID-19 financial relief schemes

The insolvency service has announced three directors have been banned following investigations which found that nearly £100k worth of bounce back loans had been inappropriately applied for, or misused.

The Bounce Back Loan (BBL) scheme ran to March 2021 and provided loans of up £50k to help businesses survive the impact of COVID-19.

Rafael Scher, 38, from NS cleaning services applied for a BBL of £30k on 15 May 2020, despite the company being insolvent and already ceased trade, meaning there was no prospect of repayment of the loan.

According to the insolvency service, Scher used the loan to pay £29.9k to a single trade creditor, but ignored other creditors with sizable debts, and also the company’s tax liabilities which amounted to over £94,000.

Scher signed a disqualification undertaking which prevents him from acting as a director for nine years, effective from 25 October 2021.

Mujeebullah Khan, 34, and Muhammed Omair Javaid, 33, ran Chunky Chicken, a local Nottingham takeaway until December 2019, when they sold the business.

The insolvency service said Khan “improperly” applied for a government-backed BBL of £50k in the business name after the sale of the company.

Both Khan and Javaid declared themselves bankrupt on 24 May 2021, citing debts of over £200k that included the BBL and signed bankruptcy undertakings that extended their restrictions for 8 years.

According to the insolvency service, Malcolm Wilks, 57, received a BBL of £19k on 11 November 2020 after closing the Royal Oak pub and a day later, the supervisor of his IVA terminated the agreement and confirmed to the insolvency service that Wilks had only made 2 repayments.

The insolvency service said that Wilks transferred nearly £17k of the BBL into his personal bank accounts and paid over £4.1k to his ex-girlfriend as well as other expenditures. 

Wilks signed a bankruptcy restriction undertaking that extends the duration of his bankruptcy for 8 years, starting on 18 December 2021.

Alan Draycott, deputy official receiver, said: “As these three cases show, the insolvency service will not hesitate to investigate and use our powers against those who abused the Covid-19 support schemes.”

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