Bounce Back Loan Fraud and Rogue Directors

September 5, 2023

By Kate Heaney

Last September we published an article about the estimated £4.9 billion lost to Bounce Back Loan fraud. Since then, the Insolvency Service, the National Crime Agency and the UK Government have continued to investigate and prosecute directors for their misuse of the Bounce Back Loan scheme. There continues to be high numbers of disqualifications, but the estimated losses are now thought to be considerably less.

What is a Bounce Back Loan?

At the start of the Covid-19 Pandemic, the UK Government introduced a lifeline to small businesses in the form of the Bounce Back Loan scheme. Businesses were able to borrow up to £50,000, to be repaid over a period of 6 years. A business could only borrow up to 25% of its turnover, but notably, previous years’ accounts and trading records did not have to be relied upon. Basic fraud checks were almost entirely disregarded in the rush to help vulnerable small and medium businesses.

How have the Bounce Back Loans been misused?

Due diligence checks were relaxed for the Bounce Back Loans scheme, with businesses asked to self-declare their eligibility. This inevitably left the scheme open to abuse, causing the taxpayer to lose billions of pounds. It has been reported that some directors spent their Bounce Back Loans on luxury items like new cars, extravagant holidays, sending lump sums to themselves and family members, or to pay off their personal mortgages or put deposits down on houses, rather than using them to support their businesses.

A key rule set by the government was that the Bounce Back Loans were to be used for the economic benefit of businesses, but it seems that many individuals used Bounce Back Loans for anything but that. In a recent article published by the Guardian, in which our Insolvency Partner, Mark Rostron, is also quoted, it is reported that as of June 2023, there have now been 611 cases involving abuse of Bounce Back Loan schemes and 752 directors have been disqualified. 9 directors have also been prosecuted for such offences, and last month saw one director jailed for 8 months for offences related to Bounce Back Loan fraud.

What’s being done about bounce back loan fraud?

The government introduced new measures against those who fraudulently misused their Bounce Back Loans which includes prosecution and disqualification of directors, as is shown in the statistics above. The new measures also extend the Insolvency Service’s powers to investigate and disqualify company directors who abuse their powers and dissolve companies to avoid paying back their Bounce Back Loans. Last month also saw one such director, who dissolved his company almost immediately after receiving a Bounce Back Loan, receive a two-year suspended prison sentence and an electronically tagged curfew.

A director found guilty of fraudulently using a Bounce Back Loan could be held personally liable for repaying the outstanding balance due on the loan, which could be anywhere up to £50,000. The director may also face director disqualification and a heavy fine, and even prison.

What we can do to help?

If you have been appointed liquidator of a company and you suspect the director has misused a bounce back loan, we can assist you with recovery action. This may also include pursuing the director for misfeasance and/or breach of their fiduciary duties. For further help and advice, contact Darwin Gray’s insolvency team for a free initial chat:

Mark Rostron on 02920 829 129 or at

Kate Heaney on 02920 829 121 or at

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Kate Heaney
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