Director Disqualification - Bounce Back Loans

These investigations, conducted by the Insolvency Service on behalf of the Secretary of State for Business and Trade, focus on directors who obtained BBLs for their companies. The primary concern is whether those companies were entitled to the amounts they applied for—typically, this scrutiny arises when the company’s declared turnover did not justify the loan received.

Where investigations establish that misconduct has occurred, legal proceedings are typically initiated against the director(s) or shadow director(s).

Director Disqualification proceedings are pursued under the Company Director Disqualification Act 1986 ("CDDA"). The most frequently invoked provision—section 6—imposes a duty on the court to disqualify directors if:

"the court is satisfied—
(i) that the person is or has been a director of a company which has at any time become insolvent (whether while the person was a director or subsequently), or
(ii) that the person has been a director of a company which has at any time been dissolved without becoming insolvent (whether while the person was a director or subsequently), and
that the court is satisfied that the person’s conduct as a director of that company (either taken alone or taken together with the person’s conduct as a director of one or more other companies or overseas companies) makes the person unfit to be concerned in the management of a company."

Government ministers have reported that approximately £46 billion was borrowed through around 4.5 million loan applications. Of the amount borrowed, roughly 13% has been repaid, 59% of borrowers remain on schedule with their repayments, and a further 20% has been settled under Government guarantees. This leaves approximately 8% of the total sum borrowed under the scheme—around £3.7 billion—outstanding.

Government figures also confirm that fraudulent claims account for approximately £1.65 billion of the loans that were issued during the pandemic.

Recent data from the Insolvency Service on actions taken against directors in connection with the abuse of BBLs (or Covid Business Interruption Loans) reveals that 831 directors were disqualified between 2023 and 2024. This is around an 80% increase compared to the previous year’s disqualifications. Notably and perhaps as worryingly, the increase in numbers is not only in the disqualifications themselves but also in the duration of the disqualification periods, by the Insolvency Service, in Covid-related cases.

On average, the Insolvency Service now seeks disqualification periods of 9 to 10 years for directors involved in Covid-related loan misconduct. This places these cases among the most severe, with the maximum period capable of being ordered by the courts being 15 years. The severity of these penalties underscores the Insolvency Service’s commitment to addressing misconduct in relation to Covid loan schemes and reflects the seriousness with which these cases are still being pursued several years after the loans were taken.

Our team has substantial experience in dealing with director disqualification cases and, most recently, those involving bounce back loans. They can provide you with the expert advice and practical support your need to be able to deal with issues raised by the Insolvency Service.

A specialist in insolvency and restructuring work, Richard regularly advises on director disqualification cases. If you would like to discuss anything in this article, please contact Richard Ludlow on 020 8290 0440.