Claims against directors for misuse of Bounce Back Loans and other financial support

The government’s package of financial support for businesses during the COVID-19 pandemic, including Bounce Back Loans, was widely taken up. Many companies facing insolvency will have liabilities in respect of Bounce Back Loans, Coronavirus Business Interruption Loans (CBILS) and Coronavirus Large Business Interruption Loans (CLBILS).

Office holders are likely to encounter instances where directors have applied for funds offered by these schemes beyond the company’s entitlement, and/or misapplied Bounce Back Loans or government grants obtained during the height of the COVID-19 pandemic.

With Bounce Back Loans capped at £50,000, office holders will be concerned about the cost effectiveness of making claims where some or all of the loan proceeds have been misapplied, particularly on occasions when the assets of the insolvent entity will be insufficient to meet the costs of the proposed claim.

The Restructuring & Insolvency team at Ashfords LLP has developed an innovative package of pricing options to suit office holders in connection with claims of this nature, including risk/reward sharing and fixed fee options as alternatives to standard hourly rates, all aimed at ensuring there will be a net recovery to the estate.

Further details can be found here or please talk to one of the Restructuring & Insolvency team who will be happy to discuss this with you.

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