Following a review of the company’s dealings and transactions, the liquidators questioned our client over the use of the BBL funds and made a referral to The Insolvency Service on this basis.
We acted on behalf of our client and worked with all parties to reach a suitable agreement in respect of not only the funds but to mitigate any disqualification proceedings.
The challenge
BBLs are state-backed loans introduced to offer financial support to SMEs during the COVID-19 pandemic.
They were simple and easy to apply for, via an online application process, with few checks required and without the need to make any repayments for the first 12 months, with no interest payable for 12 months and then accruing at the low rate of 2.5% from month 12 for the remainder of the term.
One condition of a BBL was that the money was only to be used for the benefit of the business and should not be used for the benefit of any other business or the personal use of the company's directors and shareholders.
There have been many stories of the loans being misused, and the government made a commitment to crack down, introducing The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 in February 2022.
The liquidators were chasing our client for the return of the BBL because they believed the amount actually applied for was overreaching and that the sums received had not been used for the company's benefit.
The solution
Lawyers from our restructuring team worked with the client to gather information on the company at the time that the BBL was applied for, the advice that the director had taken and their understanding when making the application.
The team then liaised with both the liquidator and the Insolvency Service (who were claiming against the director separately), setting out the real position at the time and the pandemic’s impact on not only the company but the director/shareholder personally.
The outcome, after mitigation, was a significantly reduced settlement figure with the liquidator and no disqualification whatsoever with The Insolvency Service.
The impact
After a stressful time during the pandemic, losing their business and dealing with insolvency over a number of years, the matter has been closed for the director, and the stress has been removed from their day-to-day life.
This allows them to get on with their new career in an entirely different sector.
It also allows for, in the circumstances, a sensible and reasonable recovery for the liquidators (and ultimately the government).
This is a great result for all involved and shows the real benefit of seeking early legal advice if you find that your company is struggling or if you find yourself in a similar situation, having received correspondence following an insolvency situation.