News story

Insolvency Service newsletter – Spring 2023

The Spring 2023 edition of our newsletter is available, with articles on our continued tough action against those convicted of covid support abuse, an update on compensation for postmasters as part the Post Office Horizon IT Inquiry, The Spring 2023 edition of our newsletter is available, with articles on our continued tough action against those convicted of covid support abuse, an update on compensation for postmasters as part the Post Office Horizon IT Inquiry, and the launch of the new Official Receiver Central Case Team and Aftercare Team.

From:
The Insolvency Service
Published
12 May 2023

Welcome to the Spring 2023 edition of the Insolvency Service stakeholder newsletter which gives the latest news, policy developments and enforcement successes.

Tough action taken against directors for Covid support abuse

The Insolvency Service has been at the forefront of Government action to clamp down on individuals and companies who abused the financial support given to businesses during the pandemic.

In 2022-2023, we used our civil and criminal enforcement powers to disqualify over 450 directors who abused the COVID-19 support scheme, as part of our ongoing work to track down pandemic fraudsters.

Figures published in April, by the Insolvency Service also show that directors guilty of COVID-19 related misconduct are being hit with longer disqualification periods and some with prison sentences. The average length of bans handed out to directors in the last year was seven years four months, up from five years ten months in 2021-22.

Of the total 932 director disqualifications obtained by the Insolvency Service in 2022-23 – 459 were cases involving COVID-19 financial support scheme abuse.

These have included:

The director of Digital Business Box Ltd. director who secured a £50,000 Bounce Back Loan and then applied to dissolve his company two weeks later. He was sentenced to 20 months imprisonment, suspended for 18 months, and 300 hours of unpaid work.

The director of Conwy Valley Lodge Ltd, which ran a hotel close to Snowdonia in Wales, who secured a £20,000 Bounce Back Loan, immediately before she applied to dissolve the company. She sentenced to 26 weeks’ imprisonment suspended for 12 months.

The director of Safi Care Ltd which supplied staff for care homes who secured a £50,000 Bounce Back Loan and a £100,000 Covid Business Interruption loan. The company went into liquidation owing the full amount for both loans and the director was banned for 7 years.

The director of Fortress Restructuring Ltd who secured a £50,000 Bounce Back Loan despite the company not trading. The company was wound-up in the public interest on the petition of the Secretary of State and the director was banned for a period of 10 years

In addition to its civil enforcement action, the Insolvency Service also brought criminal prosecutions against six directors in 2022-23 for COVID-19 related misconduct.

Dave Magrath, Director of Investigation and Enforcement at the Insolvency Service, said:

“These fraudsters are just the latest to find out that we will not hesitate to take firm action where we uncover such abuse, and this can ultimately result in a jail sentence.

The purpose of the Bounce Back Loan scheme was to support businesses during the pandemic, but it is clear a minority of company directors chose to maliciously abuse the scheme and defraud the taxpayer. Our team of experts continue to work round-the-clock to bring these criminals to justice.”

Update on compensation for postmasters subject to bankruptcy orders

The Insolvency Service and Official Receiver are continuing to work with the Post Office and the Department for Business and Trade on the various compensation schemes.

The Post Office is now accepting eligible late applications from any post masters who believe they experienced shortfalls related to the Horizon system. You can find information about eligible late applications on the Scheme website.

The latest update on the relevant Schemes are as follows:

Historical Shortfall Scheme

Under this scheme, compensation awarded for personal losses, for example, damage to reputation or distress, does not form part of the bankruptcy estate and will be paid by the Post Office to former postmasters.

However, elements of the compensation relating to financial losses, for example those due to loss of earnings, are an asset under insolvency law of the bankruptcy and legally must be realised for the benefit of creditors.

The Official Receiver, as trustee of the bankruptcy estates, must act in accordance with their statutory duties and distribute realised assets for the benefit of creditors. The Official Receiver is actively engaging with creditors to establish if they wish to pursue their claims in the postmaster bankruptcies and seek a distribution from the compensation awards.

If there is a surplus following the payment of any statutory costs of the bankruptcy and any claims from creditors that wish to receive a distribution from the compensation awards, the funds will be paid to the former bankrupts.

Group Litigation Order

In cases where former postmasters were previously subject to a bankruptcy order and are now discharged, neither the interim payment nor any future payments under the scheme are due to the bankruptcy estate. This means that any compensation will, therefore, be paid in full to the former postmasters.

We continue to work with the scheme administrators, the Department for Business and Trade, to ensure these payments are made as quickly as possible to the former postmasters.

Overturned Historical Convictions

The interim payment or any future payments under the scheme, are being paid in full to the former postmasters who were subject to a bankruptcy order and are now discharged. Neither the interim payment, nor any future payments under the scheme are due to the bankruptcy estate.

The Official Receiver has also signed waivers to help with payments being made to the former postmasters. We continue to work with the scheme administrators, and the Department for Business and Trade, to ensure these payments for former post masters and mistresses are made as quickly as possible.

New Official Receiver Service Central Case and Aftercare teams

As part of our strategy to sharpen our operating focus, we have centralised some Official Receiver functions to provide a more efficient way to deliver our services for customers.

The Official Receiver Central Case Team (CCT) is a single entry-point for most new cases. The new team manages the initial administration process on all bankruptcy and company cases. More complex bankruptcies and all company cases are then transferred to a local Official Receiver for further work.

The new centralised OR Aftercare function brings together technical and administrative expertise to manage aftercare activities. This can include requests for documentation which can be raised many years after an insolvency. The new team provides a more efficient way of dealing with queries and maintaining service delivery on cases that arise once the case has been closed

Call handling has also been centralised. The agency’s central Customer Services Team is now the first point of contact for customer calls to all Official Receiver Services teams.

Confidence in the Regime

The Insolvency Service has published a second report into Confidence in the Regime - GOV.UK (www.gov.uk). The report covers the views of creditors, legal professionals, directors and academics in 2022/23. The topics covered in the research included perceptions of awareness, fairness, efficiency and effectiveness of the regimes.

Creditors, legal professionals and academics typically believed the regimes are transparent, promote economic stability and are fair. They acknowledged the difficult trade-offs that are needed and were largely complimentary of the regimes’ balance. Those who were able to compare the regimes internationally consider them to be amongst the best in the world.

Insolvency Live! 10 July 2023

The 2023 Insolvency Service’s annual event Insolvency Live! 2023 takes place in London on Monday 10 July. We are looking forward to hosting our first wholly in person conference since the end of the pandemic. Invitations are currently being issued and if you are interested in attending, please contact in us via Stakeholder@insolvency.gov.uk.

Public Sector Counter Fraud Awards

The Insolvency Service was shortlisted for the ‘Team of the Year’ award at the Public Sector Counter Fraud Awards for cross-agency work on Bounce Back Loans abuse. Although the winners were our HMRC Cyber Crime Team colleagues, we were delighted to have our work recognised by being shortlisted for this award which celebrates expertise and innovation in the public sector counter fraud profession.

Latest from the Insolvency blog

Another great way to find out what’s going on at the Insolvency Service is to subscribe to our blog feed which is regularly updated with our latest news and views.

The Insolvency Service has produced an A-Z of bankruptcy guide. It is a clear and accessible guide that breaks down the jargon for non-professionals who are new to bankruptcy issues. It can be used by l insolvency professionals and organisations to help explain the technical nature of the terms used.

Other recent blogs

Published 12 May 2023