Company directors banned for Bounce Back Loan fraud

Two company directors have been banned for a total of 21 years after they fraudulently claimed £100,000 in bounce back loans.

Following an investigation by the Insolvency Service, Aamer Aslam from Huddersfield and Razwan Ashraf from Keighley were disqualified for 11 and 10 years respectively after they fraudulently claimed Bounce Back Loans (BBL).

The disqualifications prevent both from directly, or indirectly, becoming involved in the promotion, formation, or management of a company, without the permission of the court.

The duo were co-directors of Scholars Academy Ltd, which is a specialist tuition centre for children in West Yorkshire.

In May 2020 Aslam applied for a BBL by providing an estimated company turnover of £200,000. Scholars received the loan of £50,000 but went into voluntary liquidation in January 2021, which triggered the investigation by the Insolvency Service.

At the time of liquidation, the directors listed the company’s liabilities to the bank as £7,000, but the bank later notified the liquidator that it was owed £50,000 by the company due to the BBL.

The investigation found that the duo was inflating the company’s turnover with Scholars’ bank statements actually showing a maximum monthly income of just £640, which means their turnover was only £7,680 and did not meet the criteria to apply for a BBL.

It was also found that Aslam and Ashraf used the money to make monthly payments to four family members of Ashraf. All four received £2,000 a month after the duo received the loan money.

Aslam and Ashraf told the Insolvency Service that these payments were genuine business expenses, but they were unable to provide evidence to support this.

Alongside this, Ashraf was also the sole director of another educational company, Progress First Ltd, and in May 2020 he applied for a BBL and fraudulently declared in the application form that annual turnover in 2019 was £200,000, when Progress’ bank statements showed that turnover was £38,973.

This resulted in Progress receiving the full loan of £50,000, when it would only have been entitled to a loan of £9,927.

Ashraf claimed that the money was used to pay for company expenses, however, regular payments were made to three individuals, and no evidence was produced to show that these payments were genuine business expenditures.

Ashraf has since repaid £35,000 to the liquidator to settle claims against him for the Progress loan, and a further £25,000 in settlement of claims against both directors about the loans taken out by Scholars.

COVID crackdown

This is the latest in a number of bans issued by the Insolvency Service against directors who have misused the COVID support schemes.

The Insolvency Service has been given new powers to investigate, disqualify and potentially prosecute company directors who abuse the company dissolution process.

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act will also help tackle directors dissolving companies to avoid repaying Government-backed loans taken out during the Coronavirus pandemic.

Under the terms of the Act, the Insolvency Service, on behalf of the Business Secretary, will be able to investigate and tackle ‘unfit’ directors who place their firm in administration to avoid paying subcontractors and suppliers.

If misconduct is found, directors can face sanctions, including being disqualified as a company director for up to 15 years or, in the most serious of cases, prosecution.

The Business Secretary will also be able to apply to the court for an order to require a disqualified director of a fraudulently dissolved company to pay compensation to creditors who have lost out due to their actions.

In addition, the Insolvency Service will be able to investigate live companies where there is evidence of wrongdoing, such as misuse of COVID support.

Link: Bans for two directors who abused Bounce Back Loan scheme