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Nearly two thirds of all director bans last year were related to misconduct and fraud related to covid loans although most avoided criminal prosecution
With billions of pounds of Covid-related fraud, the Insolvency Service annual report showed that 831 directors were disqualified in 2023-24 for abuse and fraud over bounce back loans and other Covid support programmes, against a total of 1,222 director bans.
Covid fraud was a priority for the Insolvency Service in 2023-24 with 62% of director bans solely related to misconduct and fraud related to bounce back loans and other Covid schemes such as Eat Out to Help Out. In total, 831 directors were banned after investigations by the Insolvency Service in 2023-24 which found widespread Covid loan abuse.
The majority of Covid cheats avoided criminal charges, but there were 22 criminal prosecutions of company directors, representing a quarter of legal actions brought by the Insolvency Service, while steps were taken to recover £2,833,937 from 90 directors guilty of Covid loan fraud through compensation orders.
Dean Beale, chief executive of the Insolvency Service, said: ‘We have continued to maintain focus on fraud related to Covid-19 financial support schemes, increasing our enforcement outcomes from 48% last year to 62% of all our 2023-24 disqualification and criminal outcomes’.
During the year, the Insolvency Service also secured the disqualification of a total of 1,222 directors for misconduct, carried out 139 live company investigations and obtained winding up orders for 45 companies which were acting contrary to the public interest.
For the first time the number of directors disqualified for more than 10 years represented nearly half of all bans at 47%, up from 30% the previous year. This is a massive change from 2021-22 when only 6% or 40 odd directors were disqualified for such a long period.
The annual report also showed that Official Receivers handled 10,907 new insolvency cases, up significantly from 9,000 in 2022-23 and returned £59.2m to creditors - an increase of nearly £15m on the previous year’s £45.7m.
Total funding for the Insolvency Service was £80m, up from £68.1m, while it reported a £7.9m surplus due to slippage on the IT investment and transformation activity, and adverse cost settlements moving into 2024-25. Total operating expenditure compared to 2022-23 increased by £221.2m to £661.9m, driven by an increase in Redundancy Payment Scheme payments of £212.5m due to a rise in the number of settlements made compared to last year.
There has also been increased action on money laundering and crypto scams with the creation of a dedicated anti money laundering investigation team to focus on misconduct by businesses listed on the Companies House register.
‘We are also putting systems in place to investigate new offences to tackle economic crime and support economic growth introduced by the Economic Crime and Corporate Transparency Act 2023,’ noted Beale.
‘This new legislation has also provided us with a new fee funded income stream for our corporate investigation and enforcement activity, key to helping us achieve a sustainable funding model.’
Future plans include ongoing investment in IT data analytics systems to improve investigation activities, and the launch a new digital service for customers, replacing paper-based reports to creditors and proof of debt forms with online submissions and reporting options.
As part of a restructure plan to reduce the office estate from 19 offices to 11 regional centres, new offices opened in Edinburgh and Croydon, replacing existing sites, while three offices in Reading, Blackpool and Birkenhead closed, with staff relocated to regional centres.
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