Penalties for misuse of coronavirus loans, insolvency firm Antony Batty warns

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COMPANIES have been warned they could face penalties including winding-up orders and disqualifications of directors if coronavirus loans have been misused or improperly requested.

Insolvency firm Antony Batty says it has also heard of companies struggling to repay government-backed loans and struggling to renegotiate.

The government has backed loans totaling £38 billion in business loans under the Coronavirus Business Interruption Loan (CBIL) scheme and its replacement with the Bounce Back Loan (BBL) scheme.

Elaine Wilkins, business development manager at Antony Batty’s office in Bournemouth, said that although the government guaranteed 80% of the funds loaned, there were indications that the government guarantee could be withdrawn when the lender did not use systems to identify inappropriate requests.

“This type of situation could lead to the lender being 100% responsible for these loans and lead them to consider their options for recovering these funds,” she said.

HMRC said it could issue freezing orders to recover funds fraudulently lent, while the Insolvency Service has liquidated businesses and obtained orders disqualifying directors for up to 15 years.

Fraudulent loans could also result in civil or criminal liability.

Ms Wilkins added: “As insolvency practitioners, we have a duty to investigate the affairs of an insolvent company and the conduct of its directors.

“This would involve reviewing all applications for such loans to verify that they have been properly made and that these funds have been properly used to support the business as intended, and not, for example, to replace an existing loan that had been personally guaranteed by the directors.”

She said many businesses had only been able to weather the pandemic with government support, but long-term recovery also required economic growth, which had been pinched by inflation and supply chain issues. supply.

Antony Batty has heard of companies starting to struggle with repayments and finding it difficult to renegotiate payments with the lender.

But the company said troubled businesses could be turned around through measures such as negotiations with creditors, refinancing or restructuring using a company voluntary agreement (CVA).

The government guarantee on a Covid loan only takes effect if a business enters a formal liquidation process, so loans and repayments must be processed if a business is to continue.

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