THE case of a company director who was convicted of bounce back loan fraud shows the need to take care when winding up businesses, an insolvency firm has warned.

Ben Hamilton, director of Netelco Ltd, filed paperwork to have his business dissolved the day after a £25,000 bounce back loan (BBL) was paid into the company bank account.

He was fined £2,500 and given a 15-month prison sentence, suspended for 18 months.

The Insolvency Service said Hamilton applied for a bounce back loan in May 2020 on behalf of his two-year-old company.

“The striking-off application to dissolve the company was explicit that interested parties and creditors, such as a bank with an outstanding loan, must be notified within seven days of making an application to dissolve a company,” the service said.

“The form also highlighted that failure to notify interested parties is a criminal offence, however Mr Hamilton did not follow these rules.

“The company was dissolved in December 2020 and was subsequently identified as a likely bounce back loan fraud as part of the government’s forensic counter-fraud work.

“Mr Hamilton did not co-operate with the Insolvency Service criminal investigation team, nor attend an interview when given the opportunity. Only when the Insolvency Service obtained a Proceeds of Crime Act restraining order on his bank accounts did he engage with the investigation, at which point he repaid the Bounce Back Loan in full.”

Elaine Wilkins, from the Bournemouth office of licensed insolvency practice Antony Batty & Co, said: “This case not only highlights the need to deal with BBLs correctly but also the risks of applying to strike off a company rather than appointing a licensed insolvency practitioner to wind it up via a formal members (solvent) or creditors (Insolvent) liquidation process.

“The government recognises that some companies who took out BBLs may not survive but expect such companies to be formally liquidated, and an investigation to be conducted by the liquidator into the use of the BBL.

“The vast majority of BBLs were used to support businesses through the pandemic and were used to pay rent, staff costs and overheads. However, we have come across numerous examples of possible abuse, for example using the BBL to repay or make loans, from/to directors or shareholders; to repay more expensive loans/finance agreements; or to purchase cars and even Jacuzzis.

“If directors are to avoid prosecution for any such abuse, they need to take formal advice, which will normally require the repayment of the BBL on terms to be agreed. We would strongly advise directors in such a position not to put their heads in the sand but to seek advice early and to try to deal with the situation in an open and transparent way.”