Director Over-Egged Turnover to Obtain a £50k BBL, Moved Funds to a Different Bank Account to Ringfence Them and Didn’t Disclose BBL at Liquidation – Upshot Is a 7 Year Disqualification

I have discovered a new term that I have not seen used before when it comes to the Insolvency Service explaining several reasons for slapping a Company Director with a disqualification, that being “ringfencing” Bounce Back Loan funds. That describes the act of moving funds from one bank account to another.

Below you will find an overview of a Company Director that has just been hit with a 7 year disqualification for the reasons outlined.

Iurie Grigoras (“Mr Grigoras”) caused Nions Home Ltd (“Nions”) to breach the conditions of the Bounce Back Loan (BBL) Scheme by applying for a Bounce Back Loan of £50,000 when he knew or ought to have known that Nions was only eligible for a loan to a maximum of £23,228, based on total sales income received in 2019.

Of the £50,000, £37,526 was paid out for the personal benefit of Mr Grigoras and his spouse contrary to the conditions for the use of a BBL .

In that:

The BBL criteria allowed a business to borrow between £2,000 and up to 25% of the company turnover (up to a maximum of a £50,000 loan).

Based on sales income received and banked during 2019, Nions was eligible to borrow a maximum of £23,228.

Total sales income received into Nions’ bank account throughout 2019 amounted to £92,911.

On 5 May 2020, Mr Grigoras applied for a BBL of £50,000 on behalf of Nions, stating in the loan application that Nions’ turnover for 2019 was £2,000,000;

On 08 May 2020, funds of £50,000 were credited to a current bank account used as a trading account by Nions.

On 10 May 2020 £50,000 was transferred to another bank account so in effect the BBL monies were ringfenced;

Between 27 July 2020 and 02 November 2020, a total of £37,526 of BBL funds were paid to Mr Grigoras and his spouse which he has stated were in respect of wages due to them both;

On 02 December 2020, Mr Grigoras instructed the Insolvency Practitioner to commence the liquidation proceedings, failing to disclose the existence of the BBL as a liability in the liquidation.

At the date of the Liquidation on 14 December 2020, a total of £209,596 was owed to creditors, of which at least £148,096 was owed to HMRC in respect of VAT, £50,000 in respect of the BBL, £3,160 to trade creditors and £8,340 to the Director.